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Aug 06 2012

Oil Prices Falter As Market Driven By Economic Concerns, Not Fundamentals

Oil Prices Falter As Market Driven By Economic Concerns, Not Fundamentals

Oil prices faltered last week, driven by broad economic concerns rather than crude market fundamentals. Benchmark crude prices settled lower for the first time in five sessions on 30 July, over concerns that expected financial stimulus packages from the US and Europe may fail to rally their flagging economies. The fall came despite a Reuters report saying that OPEC output fell by 450,000 b/d in July to 31.18mn b/d. The slide continued the following day as hopes of economic stimulus from the US Federal Reserve were damped by improving US economic data. Oil markets rallied on 1 August after weekly US Energy Information Administration (EIA) data showed an unexpectedly large draw on crude oil inventories. Yet WTI slid further on 2 August as a result of disappointing US employment data.

The EIA�s Weekly Petroleum Status Report of 1 August showed that US commercial crude oil inventories decreased by 6.5mn barrels during the week ending 27 July. Gasoline inventories decreased by 2.2mn barrels while distillate inventories decreased by 1.0mn barrels. US refinery throughputs averaged about 15.6mn b/d, 225,000 b/d below the previous week�s average. Crude oil imports averaged 8.4mn b/d, down by 1.2mn b/d from the previous week. Over the previous four weeks, crude oil imports averaged 8.9mn b/d, 428,000 b/dbelow the same four-week period last year. Total products supplied over the last four-week period averaged 18.8mn b/d, down by 0.1% compared to the similar period last year. Gasoline supply was down by 3.4% at 8.8mn b/d, while distillate supply was 2.4% lower at 3.5mn b/d.

In their 1 August Oil Market Comment , BNP Paribas analysts Harry Tchilinguirian and Gareth Lewis-Davies observed: �The headline numbers for today�s EIA release were at face value price supportive with a larger-than-expected crude draw and unexpected declines in gasoline and distillate inventories. However, the subsequent price response, after an initial spike, has been limited. This may indicate that market participants are focusing more on the potential for central bank action this week and related macro data� It may also recognize that a crude stock overhang is largely intact, partially allaying concerns over a tight product position� For the moment, it would appear that financial trends are largely swaying prices in the oil complex.�

Settlement Prices For Benchmark Crudes ($/B)

Date

WTI

ICE Brent

DME Oman

ICE Dubai

OPEC Basket

27 July

90.13

106.47

102.92

103.50

102.92

30 July

89.78

106.20

102.49

102.98

102.94

31 July

88.06

104.92

102.09

101.70

102.22

1 Aug

88.91

105.96

101.42

102.20

102.54

2 Aug

87.13

105.90

102.02

102.14

103.07

© Copyright MEES 2012.


© Copyright Zawya. All Rights Reserved.


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