MARKET WATCH: Energy prices continue to climb
Sam Fletcher
Senior Writer
HOUSTON, Aug. 21 -- Energy prices climbed to nearly $115/bbl Aug. 20 as traders shrugged off a Department of Energy report that US crude inventories shot up 9.4 million bbl to 305.9 million bbl in the week ended Aug. 15—the largest weekly gain in more than 7 years.
The 10-year average for US crude stocks in that period is a draw of 717,000 bbl, said Michael C. Schmitz, Banc of America Securities LLC, New York "The higher-than-expected build was primarily driven by a 1.34 million b/d increase in imports to 11 million b/d and a further drop in refinery utilization, which declined 0.2% to 85.7% vs. consensus for a 0.4% increase (OGJ Online, Aug. 20, 2008). Refinery utilization has averaged 86.3% year-to-date, 260 basis points below the same period last year," he said. Crude inventories of 305.9 million bbl, which equate to 20.4 days of demand coverage, are 9.3% below last year and 1.9% below the 10-year average.
The fourth consecutive larger-than-expected draw on US gasoline stocks for the same week "was largely due to higher blend stock demand of 1.2 million b/d vs. 980,000 b/d in the prior week," said Schmitz. "This was partially offset by higher production with a 1.5% improvement in yield more than offsetting the small decline in refinery utilization. Four-week average gasoline demand was 1.9% lower. Gasoline inventories of 196.6 million bbl, equivalent to 20.8 days of demand coverage, are currently 0.2% above last year but 2.8% below the 10-year average," he said.
At Pritchard Capital Partners LLC, New Orleans, analysts reported crude futures climbed to a week-long high above $117/bbl in overnight trading Aug. 21. "Front-month West Texas Intermediate barely eked out a gain yesterday, as traders appeared to grapple with the differing information presented in the US Department of Energy's latest round of inventory data," they said. "Slow recovery began by the close however, with the bulls rallying around another Goldman Sachs [Group Inc.] signal, saying they think crude will hit $149/bbl by yearend. That bullish mentality is still present this morning, particularly in the refined products arena, bolstered by dollar weakness and the ongoing conflict between Georgia and Russia."
Analysts in the Houston office of Raymond James & Associates Inc. said, "Tensions between Russia and the West have risen following the US missile shield agreement with Poland. Political uncertainty with Russia, one of the largest oil and natural gas suppliers to Organization for Economic Cooperation and Development countries, and the possibility of Saudi Arabia cutting back supplies has helped crude bounce from its recent lows."
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