Oil Market Focuses on Fundamentals Amid Uncertainty Over Iraqi Military Action

Strategic Insights -

Market players shifted their attention to fundamentals, with crude futures prices in New York slipping ahead of weekly inventory reports. The American Petroleum Institute (API) figures for the week ended Feb. 6 showed a build of crude stocks, a rise in gasoline stocks, and a drop in distillate stocks. Despite expectations of military action against Iraq, traders didn't move to cover short positions, with a bit of long liquidation pushing front-month New York Mercantile Exchange (Nymex) crude futures down to an intraday low of $16.40/bbl. The refinery utilization rate increased 0.2 percentage points to 91% of capacity, and refined product markets drifted ahead of the API data.

Key Takeaways:

  • Crude stocks rose by 4.95 million bbl, contrary to expectations of a 1.5 million bbl build.
  • Gasoline stocks rose by 1.1 million bbl, while distillate stocks fell by 5.47 million bbl.
  • The refinery utilization rate increased by 0.2 percentage points to 91% of capacity.
  • Secretary of State Madeleine Albright told the Senate Foreign Relations Committee that any military action against Saddam Hussein would be thorough, but traders didn't react to this news.
  • A 55,000 b/d fluid catalytic cracker was shut down for maintenance earlier than expected at Coastal Eagle Point Oil Co.'s 125,000 b/d refinery in Westville, N.J.
  • March Nymex gasoline futures rose by 0.28 cents to settle at 51.13 cents/gallon.
  • Nymex heating oil futures continued to lose ground, with a year-on-year surplus expected to persist.
  • The Gulf Coast natural gas market saw spot prices decline, with March Nymex Henry Hub gas futures rising by 4.7 cents to settle at $2.268/MMBtu.
  • Nymex decided to lower the margins on its Henry Hub gas contract, which is expected to encourage more players to trade more contracts.

Statistics:

  • Crude stocks rose by 4.95 million bbl.
  • Gasoline stocks rose by 1.1 million bbl.
  • Distillate stocks fell by 5.47 million bbl.
  • Refinery utilization rate increased by 0.2 percentage points to 91% of capacity.
  • Front-month Nymex crude futures fell to an intraday low of $16.40/bbl.
  • March Nymex gasoline futures rose by 0.28 cents to settle at 51.13 cents/gallon.
  • March Nymex heating oil futures fell by 0.51 cents to 45.44 cents/gallon.
  • Gulf Coast natural gas spot prices declined by 5-8 cents in South Texas and 4-5 cents in Louisiana.
  • March Nymex Henry Hub gas futures rose by 4.7 cents to settle at $2.268/MMBtu.

Sources:

  • American Petroleum Institute (API)
  • New York Mercantile Exchange (Nymex)
  • Senate Foreign Relations Committee
  • Coastal Eagle Point Oil Co.