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2015-09-03 19:00:00



The price for light, sweet crude oil for October delivery plummeted by $3.79/bbl on Sept. 1, abruptly ending a late-August rally that marked the largest 3-day gain the New York market had experienced since 1990 for oil price futures.

Oil prices continued dropping in early trading on Sept. 2 with a build in US petroleum inventories.

The US Energy Information Administration reported commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased 4.7 million bbl for the week ended Aug. 28. The estimated total was 455.4 million bbl, the Petroleum Status Report showed on Sept. 2.

Oil traders on both New York and London markets have been concerned about recent swings in equity markets in China and the US.

Citigroup Inc. previously issued a research note showing light, sweet oil prices and the S&P 500 stock index have moved nearly in tandem since mid-August. Returns from the index and Brent oil futures have been correlated as high as 0.8, compared with a maximum possible 1.

China's official Purchasing Managers' Index (PMI) dropped to 49.7 during August, showing a contraction. Separately, recent statistics showed US manufacturing growth slowed to its weakest pace in more than 2 years.

Barclays analyst Kevin Norrish said recent volatility in commodities caused by China's stock market declines is a timely reminder of the country's importance in global commodity markets.

"Away from the short-term noise, a major structural shift toward a less commodity-intensive growth model is under way, raising concerns that China's commodity imports are set to slow rapidly with serious adverse impacts on commodity-exporting countries," Norrish said.

But Barclays notes China's futures imports will vary by commodity. Natural gas imports by China are likely to increase rapidly, Norrish said in a Sept. 2 research report.

US gasoline supply drops

EIA said total motor gasoline inventories decreased by 300,000 bbl last week, which put levels in the middle of the average range. Both finished gasoline inventories and blending components inventories decreased last week.

Distillate fuel inventories increased by 100,000 bbl, and EIA said that level was the middle of the average range for this time of year. Propane-propylene inventories rose 600,000 bbl, which was well above the upper limit of the average range.

US crude oil refinery inputs averaged 16.4 million b/d during the week ended Aug. 28, which was 269,000 b/d less than the previous week's average. Refineries operated at 92.8% of capacity last week. Gasoline production increased, averaging 9.8 million b/d. Distillate fuel production increased, averaging over 4.9 million b/d.

US crude oil imports averaged about 7.9 million b/d, up by 656,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged about 7.7 million b/d, which was 0.2% above the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 835,000 b/d, and distillate fuel imports averaged 77,000 b/d.

Energy prices

The October crude oil contract on the New York Mercantile Exchange plunged $3.79 to $45.41/bbl on Sept. 1 while the November crude oil contract dropped $3.91 to $46.02/bbl.

The natural gas contract for October gained 1¢ to a rounded $2.70/MMbtu. The Henry Hub, La., gas price gained 6¢ to $2.74/MMbtu.

Heating oil for October delivery dropped 12¢ to a rounded $1.58/gal. The price for reformulated gasoline stock for oxygenates blending for October dipped 10¢ to a rounded $1.40/gal.

The October ICE contract for Brent crude plummeted by $4.59 to $49.56/bbl, and the November contract dipped $4.63 to $50.36/bbl. The ICE gas oil contract for September dropped $4 to $481.75/tonne.

The average price for the OPEC basket of 12 benchmark crudes rose 76¢ to $47.77/bbl on Sept. 1.



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