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Crude climbs, but closes off the day's high
Traders digest U.S. supply data, OPEC news; natural-gas futures drop
MarketWatch
Aug 2, 2007
SAN FRANCISCO (MarketWatch) -- Crude-oil futures closed higher Thursday, but failed to set any fresh records as the market drew support from a month's worth of falling U.S. crude supplies, but stressed over a survey which showed that output from key oil producers climbed for a fifth month in a row.
Meanwhile, natural-gas futures dropped nearly 4% following a sizable increase in last week's U.S. inventories that was generally within market expectations.
Crude for September delivery tacked on 33 cents to close at $76.86 a barrel on the New York Mercantile Exchange.
The Organization of the Petroleum Exporting Countries, excluding Iraq and Angola which aren't part of the cartel's official quota, produced 26.95 million barrels per day in July, according to a survey conducted by Dow Jones Newswires, which was released Thursday. That's up from 26.88 a month earlier and the latest production figure was above the official quota of 25.88 million.
Separately, Abdullah Bin Hamad al Attiyah, Qatar's deputy premier and minister of energy and industry, said Thursday that "we are seeing some of the highest crude stocks in history.
"We don't believe the problem is related to the supply of oil. The problem comes from refinery bottlenecks and geopolitics -- these are the two main issues," al Attiyah told Dow Jones Newswires.
Phil Flynn, a senior analyst at Alaron Trading, said he believes OPEC has some "valid points, but ultimately the market is the final judge."
With prices at such high levels, 'obviously [the market is] saying it wants more oil so if OPEC was honest with itself, it would pump more oil.'
— Phil Flynn, Alaron Trading
With prices at such high levels, "obviously it's saying it wants more oil so if OPEC was honest with itself, it would pump more oil," Flynn said in emailed comments.
On Wednesday, crude futures climbed as high as $78.70 a barrel on Nymex, marking an intraday record for a front-month contract. The contract then fell back to close out Wednesday's trading at $76.53 a barrel, losing $1.68, or 2.2%, for that session. Read more.
"We need to observe price action and open interest for a few more days to see if Wednesday's reversal was a valid technical sell signal or, perhaps, just a false reading," said Edward Meir, analyst at MF Global, in a research note.
Crude supplies dropped 6.5 million barrels to 344.5 million barrels for the week ended July 27, the Energy Department reported on Wednesday. U.S. stockpiles, as measured by the agency, are still 3.8% above the year-ago level.
The weekly decline came at the same time as refinery utilization increased more than expected, to 93.6% of capacity last week from 91.7% a week earlier.
"There are no major fundamental bearish 'triggers' that could induce more selling at this stage," Meir said.
And "if you look at the long term demand, the declining supply and bearish market data, I'd be in an accumulation mood as crude moves up and potentially through $80 within the next few months," said Zachary Oxman, a senior trader at Wisdom Financial.
As for Thursday's Nymex action in petroleum products, September reformulated gasoline closed 0.66 cent higher at $2.0362 a gallon, rebounding from a low of $2.01, its lowest level since April 20. September heating oil closed up 0.52 cent at $2.0746 a gallon.
Natural-gas futures fall
Also, September natural gas closed 24.6 cents lower at $6.106 per million British thermal units, retreating as the Energy Department reported that natural-gas supplies in storage rose 77 billion cubic feet for the week ended July 27.
Analysts at Strategic Energy & Economic Research expected the data to show a buildup of 77 billion cubic feet. Global Insight was looking for an increase of 72 billion cubic feet.
It was a "nice healthy injection," said Beth Sewell, managing partner at Quantum Gas & Power Services.
"I bet we see another one next week. Demand is not as pervasive as it normally is this time of year," she said.
Total gas stocks now stand at 2.840 trillion cubic feet, up 68 billion cubic feet from the year-ago level and 410 billion cubic feet above the five-year average, the government data showed.
Supplies are "on track to beat last year's record storage," said Sewell.
Actually, supplies are "likely to continue to move much higher than last year's levels in the weeks ahead due to the fact that last year we were experiencing a major heat wave at this time," said Ben Smith, president of First Enercast Financial. "Current temperatures are warmer than normal but not at heat wave status."
"Total storage is a big fat bear," he said in emailed comments.
On the weather front, there's "not much in the tropics, mostly because hot dry Sahara winds with sand are impeding any potential storm development right now," said Sewell. "There are a couple of lows in the Caribbean that bear watching, but the market seems to be shaking that off."
"There are a lot of shorts in this market," warned Smith. "Any type of tropical storm development or sustained heat could spook them out."
In Thursday's equities action, oil and gas stocks traded mostly lower, with the Oil Service Index losing the most ground. See Energy Stocks.
In other commodities trading, gold futures closed modestly higher, but remained below $680 an ounce. See Metals Stocks.
Taking a broad measure of the commodities markets, the Dow Jones AIG Commodity Index was down 0.3% at 170.39 points.
Futures and options trading involve substantial risk.
