Economy- Crude Ends Down as Near-Term Supply Overhang Trumps Storm Fears –

Posted: October 4, 2013 in Uncategorized

Oct. 3, 2013

NEW YORK–Crude-oil futures prices dropped Thursday as concerns over weak near-term refiner demand overshadowed worries over a potential disruption from a tropical storm in the Gulf of Mexico, a major producing and refining region.

Several oil companies said they were removing personnel from offshore rigs as a precaution as Tropical Storm Karen approached and were closely monitoring forecasts to alter operations at refineries if needed.

Worries about the storm tempered losses in oil futures fueled by concerns that near-term oil inventories are too high as refiners reduce operations on a seasonal basis.

Light, sweet crude-oil futures prices for November delivery on the New York Mercantile Exchange settled 79 cents lower, at $103.31 a barrel, after having traded down by as much as 98 cents during the session. The decline was the biggest in 10 days and followed a sharp 2% gain on Wednesday. North Sea Brent crude oil settled 19 cents lower, at $109 a barrel.

Analysts said the market had looked beyond bearish oil inventory data after its release on Wednesday, focusing instead on news that TransCanada Corp. TRP.T -0.25% (TRP, TRP.T) had nearly completed the southern leg of its Keystone XL pipeline, which will allow more crude oil to flow from the Midwest to the key Gulf Coast refining hub. Bottlenecks in the Midwest have kept U.S. prices below global levels, and easing of the constraints will allow U.S. oil to compete in the Gulf with higher-priced imports, traders said.

But traders said the market couldn’t ignore the near-term implications of the Energy Information Admniistration’s weekly data. The EIA figures showed U.S. refiners cut their crude-oil processing rates to the lowest level since early June, helping crude-oil stocks to climb much higher than expected, by 5.5 million barrels in the week.

The report also showed gasoline inventories climbed by 3.5 million barrels a day, amid the lowest demand for the last week of September in 12 years. Gasoline stocks on Sept. 27 would stand as the highest end-September level since 1990, EIA data show.

Meantime, demand for diesel fuel/heating oil dropped 7% in the week, while stocks of ultra-low sulfur diesel stood at what would be the highest end-September level on record and the most in any month since February 2011.

Michael Wittner, analyst at Societe Generale, cautioned that refinery “runs should decline much further in the coming weeks, and this will be the key dynamic for both crude and products.”

Meantime, the National Hurricane Center said Tropical Storm Karen could make landfall at near-hurricane strength between eastern Louisiana and the Florida Panhandle on Saturday.

Crude-oil output from the offshore Gulf of Mexico averaged 1.229 million barrels a day in July, the latest data from the Energy Information Administration show. That’s little changed from a year earlier and equal to 16.4% of the nation’s oil flow. But due to a surge of nearly 1.3 million barrels a day in output from onshore shale oil fields, the Gulf’s share of the U.S total is down from 19.5% in July 2012.

The U.S. Gulf area has the world’s largest concentration of refineries, but those in the region that appear to be near landfall account for about 1.5% of U.S. refining capacity.

Despite high stock levels, refined products prices were supported by the storm.

Front-month November reformulated gasoline blendstock settled up 1.09 cents at $2.6396 a gallon, while November heating oil settled up 1.06 cents at a one-week high of $3.0033 a gallon.

via Crude Ends Down as Near-Term Supply Overhang Trumps Storm Fears –


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