Oil prices declined today with July Brent Crude sliding to US$71.48/barrel and US light, sweet crude for July delivery dropped to US$70.62/barrel on the New York Mercantile Exchange (NYMEX).
Crude was hit by yet another freefall in global equity markets amid a fresh wave of jitters over Europe’s debt crisis coupled with the lingering impact from Germany’s decision to ban naked short selling of certain euro denominated financial assets and fears that other countries could follow.
The plummeting stocks offset the positive impact from this week’s inventories reports that unexpectedly showed stronger crude demand. The American Petroleum Institute (API) reported a surprising decline in US crude stockpiles of nearly 0.8 million barrels, while an increase was expected. A more closely watched report from Energy Information Administration (EIA) showed a smaller than expected increase of 200,000 barrels in US stockpiles. EIA also said that gasoline stocks shed 300,000 barrels and distillates, which include diesel and heating oil, were down by 1 million barrels. At the same time, oil stockpiles at Cushing, Oklahoma, which is the delivery point for benchmark West Texas Intermediate crude, rose to 38 million barrels with the overall capacity estimated at 41 million barrels.
In the wake of Germany’s ban and fears that Greece’s debt crisis could spread into other euro zone countries, the euro remain at four year lows against the US dollar. A stronger greenback makes dollar-denominated commodities such as crude more expensive for holders of other currencies to dent demand.
Blue chip oil and gas producers were in decline today with the exception of Shell (LSE: RDSB), which was flat. Fellow supermajor BP (LSE: BP) posted a small gain, while BG Group (LSE: BG) declined 1.9%, Cairn Energy (LSE: CNE) lost 2% and Tullow Oil (LSE: TLW) tumbled 3.4%.
Engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) lost 2.3% and 2.8% respectively.
Midcaps followed the trend. Heritage Oil (LSE: HOIL) shed nearly 5% to slide to the bottom of the pile. Premier Oil (LSE: PMO) and Salamander Energy (LSE: SMDR) lost about 4.5%. Dana Petroleum (LSE: DNX) and Soco International (LSE: SIA) shed a little over 3%. Melrose Resources (LSE: MRS) was down 3.7%.bDragon Oil (LSE: DGO) declined 2.2% and JKX Oil & Gas (LSE: JKX) did relatively well, posting only a small decline.
Service companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) slid 3.4% and 4.1% respectively.
Some junior companies managed to go against the tide and post gains. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA), which today farmed out a project in Texas, rallied 12% and 10.5% respectively. Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) also was in demand, rising 5.5%.
Ukraine focused gas producer, Regal Petroleum (AIM: RPT) and North Sea explorers Xcite Energy (AIM: XEL) headed in the opposite direction, slipping 6% and 5% respectively.