Oil, Gas Prices Fall Following Inventory Reports

Oil, Gas Prices Aside, the U.S. Economy, DJIA and Drillers Move Ahead

Oil prices inched lower this morning, with West Texas Intermediate (WTI) and Brent below $54 and $58, respectively. Crude oil inventories increased by 7.3 million barrels, according to the Energy Information Administration’s (EIA) Weekly Petroleum Status Report, released on December 24. “[The] inventories are well above the upper limit of the average range for this time of year,” the report says. On a related note, gasoline prices declined for the 12^th straight week and have an average national retail price of $2.40 per gallon – approximately $0.86 below last year’s price.

Natural gas prices dropped more sharply than oil – the results of unseasonably warm weather. Current natural gas inventory is 3,246 Bcf, according to the EIA’s Weekly Natural Gas Storage Report. The withdrawal of 49 Bcf last week was less than most analysts expected, and current stockpiles are higher than 2013 numbers for the first time all year. Natural gas prices climbed to $3.10 on Monday morning after falling below the $3.00 mark late last week, marking the lowest prices since summer of 2012.

“This week’s withdrawal signals that natural gas supply is outstripping demand,” said a Raymond James note following the release. “Moving into next week, we expect a much lower withdrawal compared to last season on milder weather compared to last year’s severe winter.” Exactly on cue, the Weather Channel is warning the U.S. of Frona, a winter storm that it says will drop snow in Las Vegas just in time for the New Year celebration.

In Case You Missed It:

• On Tuesday Dec. 23, the Dow Jones Industrial Average crossed the 18,000 mark for the first time. The benchmark continued trading above 18,000 in today’s session. The rise followed the Federal Reserve’s decision to postpone interest rate raises until 2015. In an interview with Bloomberg, John Fox, director of research at Fenimore Asset Management, said: “Corporate America is doing fantastic, earnings are at an all time high, interest rates are low, inflation is low, and now you have the added positive of low gasoline prices. All of that adds up to a pretty good environment for equities.”
• The United States economy grew by 5% in Q3’14 – the fastest rate since 2003. All GDP estimates were revised upward by the Department of Commerce. “Oureconomy is firing on most cylinders, whereas the global economy is essentially in dire need of a spark,” said Ryan Sweet, a senior economist at Moody’s Analytics, in an interview with Reuters.
• BP plc (ticker: BP) is in talks with Rosneft to increase its stake in a project in Siberia according to Russian newspaper Kommersant. The source said BP’s investment may be as high as $800 million to gain a 20% interest in the project. BP currently owns nearly 20% of Rosneft.
• TASS, another Russian media outlet, reports Gazprom and Rosneft have been ordered by the government to sell a portion of their foreign currency revenue in exchange for Russian rubles. The ruble has declined by roughly 45% against the dollar this year as the country continues to be pressured by Western sanctions.
• BG Group is loading the Methane Rita, representing its initial shipment of LNG to China from its $20.4 billion project in Queensland, Australia. The country’s LNG export capacity is expected to more than triple by 2020.
• Turmoil in Libya continues, and a country official said operations at its two largest ports are currently stalled. The official said Libya’s production is 350 MBOPD, down from 1,600 MBOPD in 2011 when Muammar Gaddafi was still in power.
• CAMAC Energy (ticker: CAK) announced the arrival of the semi-submersible drilling unit, Sedco Express to the Oyo Field to complete the horizontals and expedite the timing of production tie-in from the Oyo-7 and Oyo-8 development wells located in OML 120 offshore Nigeria. CAMAC is also considering using the rig to drill its first Miocene-target exploration well.
• Magellan Petroleum Corporation (NASDAQ: MPET) announced that its partners in the Horse Hill-1 well in southern England have reported a conventional discovery in the Upper Portland sandstone and have materially revised upward their P50 estimate of original oil in place in this section to 5.2 MMbbls.
• Southwestern Energy continues Appalachia acquisition spree with $394 Million Deal.
• Colorado’s Oil & Gas Task Force offers oil & gas operators, local homeowners some preliminary solutions.
• The EIA put out its ELECTRIC POWER MONTHLY & ELECTRICITY MONTHLY UPDATE – December 2014 last week, giving the following highlights:

+ Coal stockpiles increased by over 12 million tons, the largest build since October 2011;

+ October average revenues per kilowatthour rose 3.4 percent compared to last year, the 23rd consecutive month of year-over-year increases;

+ Wholesale power prices fell below #$30/MWh in the Northeast as wholesale natural gas prices fell well below $2/MMBtu.

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