MARKET WATCH: Oil prices continue to fall

Sam Fletcher
Senior Writer

HOUSTON, Dec. 24 -- Oil prices continued to fall Dec. 23 with the new front-month crude dropping below $40/bbl in thin trading in the New York futures market.

It marked the seventh closing loss for front-month crude in the last eight sessions. Crude dropped nearly 2% "on a host of bearish economic data, all of which point to reduced global demand," said analysts in the Houston office of Raymond James & Associates Inc.

However, natural gas futures prices climbed more than 8% because of colder Midwest and East Coast weather. "At this time of year, it's all about the weather," said analysts at Pritchard Capital Partners LLC, New Orleans. Still, they reported gas prices down slightly in early trading Dec. 24.

Meanwhile, US officials said the gross domestic product contracted 0.5% in the third quarter following a 2.8% increase in the second quarter of 2008, an ominous indicator in the world's biggest economy.

The US Labor Department said initial requests for jobless benefits jumped to a seasonally adjusted 586,000 in the week ended Dec. 20, from an upwardly revised figure of 556,000 the previous week. That increase exceeded economists' expectations and represents the largest number of benefits claims since November 1982.

The Commerce Department documented a drop in consumer spending for the fifth consecutive month, down 0.6% in November. But part of the decreased spending was the result of much lower gasoline prices.

According to the latest MasterCard Spending Pulse report, US demand for gasoline last week increased by 3.4% over the previous week because of increased shopping and travel before the Christmas holiday, although demand is still down 3% from year-ago levels.

"Both MasterCard and the Department of Energy agree that the recent lows in [US retail gasoline] sales were reached in the first week of October and have been steadily improving since," said Olivier Jakob at Petromatrix, Zug, Switzerland. Gasoline sales are reported up 780,000 b/d from early October.

Jakob said, "Gasoline futures are still the largest pressure point on the energy complex, but sales data are indicating some recovery of demand. The Asian and European naphtha cracks have rebounded quite sharply over the last 10 days, the crude arbitrage has gone negative over the last 10 days (this will work against the gasoline arbitrage)….the evolution over the last 10 days of all these parameters is a warning flag to be considered before having a too negative view on gasoline."

In other news, Raymond James analysts earlier reported the "typical Middle Eastern oil-producing country" needs an oil price of roughly $70/bbl to sustain budgetary needs. Now, they reported Dec. 24, "Russia, it turns out, is in a similar boat—and that boat has sprung a leak. The Kremlin said today that it expects a budget deficit for the first time in a decade. Russia's original 2009 budget was based on $95/bbl oil, since revised to $50/bbl, but with oil below $40/bbl, Russia will almost certainly need to tap its 'rainy day' fund in the interim."

US inventories
The Energy Information Administration said Dec. 24 commercial US inventories of crude fell by 3.1 million bbl to 318.2 million bbl during the week ended Dec. 19. Wall Street analysts were expecting an increase of 500,000 bbl for the week. Gasoline stocks jumped by 3.3 million bbl to 207.3 million bbl during the same period, exceeding expectations of an 800,000 bbl build. Distillate fuel inventories increased by 1.8 million bbl to 135.3 million bbl, surpassing an expected increase of 700,000 bbl.

Imports of crude into the US fell 555,000 b/d to 9.1 million b/d in that period when fog disrupted shipping along the Gulf Coast. The input of crude into US refineries declined by 41,000 b/d to 14.5 million b/d with plants working at 84.7% of capacity. Gasoline production dropped to 9.1 million b/d and distillate fuel production decreased to 4.4 million b/d.

EIA also reported the withdrawal of 147 bcf of natural gas from US underground storage in the week ended Dec. 19. That left little more than 3 tcf of gas in storage, 35 bcf less than in the same period a year ago but 99 bcf above the 5-year average.

Energy prices
The February contract for benchmark US light, sweet crudes dropped 93¢ to $38.98/bbl Dec. 23 on the New York Mercantile Exchange. The March contract lost 85¢ to $42.03/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., jumped $3.17 to $33.98/bbl. The January contract for reformulated blend stock for oxygenate blending (RBOB) fell 3.02¢ to $86¢/gal on NYMEX. Heating oil for the same month declined 1.45¢ to $1.33/gal.

The January natural gas contract shot up 44.3¢ to $5.74/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped by 0.5¢ to $5.40/MMbtu.

In London, the February IPE contract for North Sea Brent crude lost $1.09 to $40.36/bbl. Gas oil for January dropped $23 to $418/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes fell $2.43 to $34.49/bbl on Dec. 23.

Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Regulators approve Phillips 66’s California refinery improvement project

02/04/2015 The governing board of California’s Contra Costa County has approved a permit for Phillips 66 to move forward with a proposed project that would en...

CNOOC lets contract for Huizhou refinery expansion

02/03/2015 CNOOC Oil & Petrochemicals Co. Ltd., a subsidiary of China National Offshore Oil Corp. (CNOOC), has let a contract to Porvair Filtration Group ...

CNOOC subsidiary inks deal for grassroots refinery

02/02/2015 Hebei Zhongjie Petrochemical Group Co. Ltd., a subsidiary of China National Offshore Oil Corp. (CNOOC), has entered into a $700 million agreement w...

Union strike under way at US refineries, petchem plants

02/02/2015 The United Steelworkers Union (USW) has instituted a strike at nine US refining and petrochemical production plants following a breakdown in negoti...

Novel upgrading technology cuts diluent use, capital costs

02/02/2015 A novel bitumen upgrading process that decreases the amount of diluent required for pipeline transportation and reduces overall operating costs has...

E&Y: Oil-price collapse to boost global M&A activity in 2015

02/02/2015 The oil-price collapse will facilitate increased global transaction activity in 2015 as companies revise and implement new strategies, according to...

Trinidad ULSD plant won’t be built in 2015, Petrotrin executive says

01/28/2015 Trinidad and Tobago’s state-owned Petrotrin has announced that its $500 million ultralow-sulfur diesel (ULSD) plant cannot be commissioned because ...

Vietnam advances Dung Quat refinery expansion plans

01/26/2015 Binh Son Refining & Petrochemical Co. Ltd. (BSR), a subsidiary of state-owned Vietnam National Oil & Gas Group (PetroVietnam), has unveiled...

OGJ Newsletter

01/26/2015

International news for oil and gas professionals

White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Emerson Micro Motion Videos

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