MARKET WATCH: January crude futures expire under $34/bbl

Sam Fletcher
Senior Writer

HOUSTON, Dec. 22 -- The expiring January contract for benchmark US light, sweet crudes fell to a 4-year record-low closing under $34/bbl Dec. 19 on the New York futures market with crude storage at Cushing, Okla., up 4.7 million bbl to 27.5 million bbl, the largest amount since April 2007.

Physical storage constraints at Cushing, a hub for crude trades and transportation, drove the January price "abnormally lower and created the largest spread between the 2 most active contract months [January and February] since 1986," said analysts at Pritchard Capital Partners LLC, New Orleans. They also reported "a surge in net speculative investment in crude complex, the highest since May." That, they said, is "feeding the emerging view that markets may have hit bottom for now, although fears over the outlook for demand tempered hopes for a bounce."

In Houston, analysts at Raymond James & Associates Inc. said the price of the new front-month February contract was up in pre-market trading Dec. 22 "following another interest rate cut from China, continued US dollar weakness vs. the euro, and comments from the Organization of Petroleum Exporting Countries that members will comply with the latest supply cuts."

They said, "The comments were made to instill confidence in the group as prices declined following last week's largest single production cut (2.2 million b/d) in OPEC's history."

However, Prichard Capital analysts said, "Asian refiners, many of which had expected at least some of OPEC's biggest producers to make deeper visible cuts in January oil shipment schedules over the weekend, have yet to receive notice of any further reductions to oil supplies since the group announced cuts last week. OPEC detailed allocation of new output cuts among members: Iran has the largest quota reduction of 562,000 b/d, while Saudi Arabia, UAE, and Kuwait each are expected to cut 375,000 b/d."

Meanwhile, Raymond James analysts said market fundamentals for natural gas are deteriorating rapidly. "The combination of strong supply growth and rapidly declining demand has caused an ugly natural gas outlook to turn much worse. Currently, the US natural gas market has 6 bcfd (or 10%) more gas in the system than the same time last year. That is a recipe for disaster," they said.

"Economic concerns in the US are now weighing heavily on industrial and power generation demand while the worldwide recession has depressed all commodity prices, effectively eliminating any fuel switching incentives. Altogether, these changes have dramatically darkened our near-term outlook on natural gas, resulting in the downward revision of our 2009 forecast to $5/Mcf from $6.75/Mcf. It now looks like US producers will have to shut in around 800 bcf of natural gas production in 2009," they said. "While our expectations of a near 50% reduction in the 2009 gas rig count will likely be too little, too late for 2009 gas prices, it may be sufficient to balance the market by 2010. Accordingly, we have initialized a 2010 forecast of $8/Mcf."

Energy prices
The January contract for benchmark US light, sweet crudes traded at $32.40-$37.59/bbl Dec. 19 before closing at $33.87/bbl, down $2.35 for the trading session on NYMEX. The more active February contract gained 69¢ to $42.36/bbl. On the US spot market, West Texas Intermediate at Cushing was down $2.35 to $33.87/bbl. Heating oil for January delivery gained 1.91¢ to $1.39/gal on NYMEX. The January contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.64¢ to $97¢/gal.

Natural gas for the same month dropped 21.4¢ to $5.33/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., increased 7.5¢ to $5.68/MMbtu.

In London, the February IPE contract for North Sea Brent crude gained 64¢ to $44/bbl. Gas oil for January lost $9.25 to $446/tonne.

The average price for OPEC's basket of 13 reference crudes fell $1.76 to $37.72/bbl on Dec. 19. So far this year, however, OPEC's basket price averages $95.87/bbl, up from an average $69.08/bbl for all of 2007.

Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Husky, CNOOC start gas production at Liuhua 34-2 field

12/15/2014 Husky Energy Inc. and China National Offshore Oil Corp. Ltd. reported the start of natural gas production at the Liuhua 34-2 gas field in the South...

Security takes center stage

12/15/2014

Thwarting terrorists, repelling pirates, and routing organized crime: sounds like themes of familiar, big-budget Hollywood movies.

Study finds small subset of wells accounts for most methane emissions

12/15/2014 A small subset of natural gas wells are responsible for most methane emissions from US natural gas production, said a study from the University of ...

US Forest Service takes no stance on fracturing in national forest

12/12/2014

The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Frac ban exemption made in Broomfield

12/12/2014 A Colorado District Court judge has ruled that a hydraulic fracturing ban in Broomfield, Colo., does not apply to an operator that entered into an ...

OSHA seeks to limit silica exposure for oil workers, Proposed rules target frac sand mining, fracturing

12/12/2014 The rapid growth in oil and gas production from shale and tight oil formations in the US is generating a boom in a related industry: frac sand. San...

Study links methane contamination in water wells to poor well construction-not fracing-in Marcellus

12/12/2014 A new study found that fugitive gas contamination at eight clusters of water wells in the Marcellus and Barnett shale regions might be linked to we...

Weak crude prices could threaten Bakken production growth

12/12/2014 Bakken shale production set another record in August, but weakening crude prices and flaring reduction efforts threatened to temper production grow...

Husky reports start of steam operations at Sunrise oil sands project

12/12/2014

Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected