HOUSTON, Nov. 20 -- The December contract for benchmark US crudes expired Nov. 17 at the lowest closing price in 17 months on the New York market amid calls from some members of the Organization of Petroleum Exporting Countries for another production cut at their December meeting.
"Calls for the second cut have reinforced doubts that the current production cut instigated on Nov. 1 was lower than the announced 1.2 million b/d," said analysts in the Houston office of Raymond James & Associates Inc.
The fall of crude futures prices last week "remains in our view a very technical move purely linked to expiry," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Still, he warned, "The move should not however be ignored" as the delivery mechanism of benchmark US crude on the New York Mercantile Exchange "will remain a threat to market stability."
The December crude contract plunged by $2.50 to $56.26/bbl Nov. 16 on NYMEX, "despite a modestly bullish US crude plus product inventory report, wherein gasoline and distillate inventories posted a much greater-than-expected decline due to an unanticipated drop in US refinery utilization," said Robert S. Morris, Banc of America Securities LLC, New York.
There also was speculation among NYMEX traders that an unnamed commodity fund may be in financial trouble and may have to liquidate its long position in the market.
The December contract for benchmark US light, sweet crudes dropped 45¢ to $55.81/bbl Nov. 17 on NYMEX. The January contract fell 40¢ to $58.97/bbl. However, unleaded gasoline for December delivery increased by 1.15¢ to $1.54/gal. Heating oil for the same month was up by 0.84¢ to $1.67/gal.
The December natural gas contract jumped by 42.4¢ to $8.18/MMbtu, "making up more ground than it lost" in the previous trading session, said Raymond James analysts. They noted that US natural gas storage surpassed 3.4 tcf in the latest report at the start of the winter withdrawal season
In London, the January IPE contract for North Sea Brent crude gained 45¢ to $58.99/bbl. However, gas oil for December fell by $21.25 to $519.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes lost $1.84 to $53.63/bbl on Nov. 17. So far this year, OPEC's basket price has averaged $61.56/bbl, up from $50.64/bbl for all of 2005.
Contact Sam Fletcher at firstname.lastname@example.org