Energy futures held down as markets go into winter well-stocked

 

China (Platts)-- 5 Nov - 10 Nov 2006

The biggest movers in the world energy futures complex last week were gasoline on the New York Mercantile Exchange and gasoil on London's ICE Futures. Both contracts ended the week higher, and were the only major contracts to move by more than 1% in value over the week as a whole.

The biggest driver in the markets was the weekly report by the US' Energy Information Administration, which showed a tightening supply-demand balance and a bigger-than-expected drop in distillate stocks.

"US inventories have fallen heavily relative to their five-year average for a fourth straight week, bringing the total fall over that period up to 32.5 million barrels or more than 1.1 million barrels/day," Paul Horsnell and Kevin Norrish, energy analysts at Barclays Capital, said in a report.

A sharp drop in crude imports to the US Gulf Coast offset an unexpected decline in refinery crude inputs, keeping US crude stocks from building as much as anticipated during the week ending November 3.

Oil futures were generally stronger at the close of the week as a result--although a sharp jump on Thursday was almost completely cancelled out by a sharp fall on Friday. Volatility remains an important theme in all the energy markets.

Light, sweet crude oil in the US closed the week at $59.59 per barrel, up less than 1%; crude ended the week up by a similar amount in London, at $59.71. Gasoline in the US rallied 3.7% to end the week at $1.5627 per gallon, while gasoil in London closed out the week at $542.75 per metric ton, up 2.3% on the week. Heating oil in New York was little moved by gasoil's gains, closing up little more than 1% at $1.6966 per gallon.

Natural gas futures, which have put in solid gains since the US storage build-up season began to wind down, sputtered out, however. In the US, Henry Hub futures lost 1% to close at $7.794 per million British thermal units. UK gas futures ended at 53.07 pence per therm, down 1.4%.

The rally in oil prices that started Thursday ran into a brick wall on Friday, after the International Energy Agency's monthly oil report called for lower global crude demand in 2007.

Demand for OPEC crude is currently outpacing estimates of the cartel's production due to a pick-up in fourth-quarter demand and lower-than-expected non-OPEC supply, the International Energy Agency said November 10.

Created: November 13, 2006

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