ICE Brent futures slip half a dollar on expected draw in products

London (Platts)--20Sep2006

ICE Brent futures fell over half a dollar on Wednesday in anticipation of
builds in distillate and gasoline stocks in the US for the second week in
succession, brokers said.
Analysts polled by Platts expected a 950,000 barrel build in gasoline
stocks, further depressing NYMEX unleaded futures. Although the anticipated
1.7-million build in distillate stocksd would not be as large as the
4.7-million reported by the Energy Information Agency last week, a 0.5%
decline in refinery utilization was expected, leaving refineries at 92.5% of
capacity.
However, the build in products, if smaller than expected, could be offset
by a larger than expected build in crude, said one broker. Analysts polled by
Platts expect a 1.6-million draw in crude stocks.
At 1104 London time (1004 GMT), November Brent was trading at
$61.66/barrel shaving 51 cents from Tuesday's close at $62.17/barrel, a day
which saw the price slip $1.88 during the day. The inter-day low hit just
after 0900 London time has seen the price of crude fall $17.50 since the
record high on August 8.
One European refiner said on Wednesday that if products continue to
weaken then it will not be too long before run cuts are a possibly.
"If Dated [Brent] gets stronger, margins are going to disappear," the
source said. "If we see further strength of [Brent]...we are not too far from
run cuts," said another refiner.
With weak product cracks, the only factor supporting margins is cheap
Dated Brent and at the moment refinery margins are close to break even or
negative as gasoline cracks and distillate cracks remain feeble.
Run cuts would be bullish for products as it would help to remove the
overhang of products and ease the pressure on the spot market,putting downward
pressure on crude as refineries cut output.
--Jonathan Davies, jonathan_davies@platts.com

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