MARKET WATCH: Crude price declines in mixed New York market

Sam Fletcher
Senior Writer
HOUSTON, Jan. 30 -- The front-month crude contract declined Jan. 29, giving up its gain from a 1-day rally in the previous session on the New York market, but prices for petroleum products and natural gas posted modest gains.

The drop in oil prices on the New York market was "driven by the continuing supply build, now 338.8 million bbl, in the face of slowing economic growth highlighted by weak durable goods orders and record unemployment benefits," said analysts at Pritchard Capital Partners LLC, New Orleans.

Gas prices, however, benefited from "a better-than-expected" report by the Energy Information Administration that 186 bcf of natural gas was withdrawn from US underground storage in the week ended Jan. 23, reducing the amount of working gas to 2.4 tcf (OGJ Online, Jan.29, 2009). "Importantly, the data implies the US gas market is now 3 bcfd oversupplied vs. 5-6 bcfd oversupplied the first week of January—a very bullish change," said Pritchard Capital Partners. "Colder-than-normal temperatures in the Lower 48 likely contributed to the above-average level of net withdrawals; heating degree-days were 11% above normal last week." After the close of trading Jan. 29, EIA reported November natural gas production was up 3.2 bcfd from year-ago levels, while industrial natural gas demand was down 1 bcfd."

Meanwhile, Olivier Jakob at Petromatrix, Zug, Switzerland, pointed out, "The West Texas Intermediate contango widens by 70¢/bbl, the [North Sea] Brent contango narrows by 28¢/bbl. The two crude benchmarks are moving in diverging trends, but given that the widening of the WTI futures contango is immediately offset by a rise in [US Gulf market] physical cash differentials, we will keep Brent as a better benchmark of the world crude oil supply and demand."

Europe has shifted from building stocks afloat to slowly reducing stocks. Jakob said, "With the flattening of the curve on non-Cushing, Okla., crude oil, freight rates are starting to move lower in a desperate effort to recreate some floating storage economics, and the pressure will remain on the Organization of Petroleum Exporting Countries to
keep some discipline if they want to curb the volume of oil idled afloat."

In London, ETF Securities Ltd. noted gold recently pushed above $900/oz for the first time since October. Analysts said investors are concerned about the paper value of currencies in the midst of large-scale government debt accumulation [via business bailouts] worldwide and are turning to gold—as they once did to oil—as a safe haven for their money.

"Governments worldwide continue to inject stimulus into their respective economies at a rapid rate. The US monetary base is currently growing at 114%/annum. This is the fastest pace of US money supply growth since records began in 1961," ETF Securities said.

GDP falls
The Department of Commerce reported Jan. 30 the US real gross domestic product fell 3.8% in the fourth quarter of 2008, compared with a 0.5% dip in the third quarter. It was the worse performance by the US economy since 1982, but analysts fear the GDP may drop even lower as the recession deepens in the first quarter of 2009. Meanwhile, the initial fourth quarter GDP figures are subject to revision—likely lower—in a Feb. 27 report that will be based on more comprehensive data.

The GDP fell as a result of diminished exports, personal consumption spending, equipment and software sales, and residential fixed investment, partly offset by increases in private inventory investment and federal government spending, said commerce officials. "The largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports," they said.

The US economy grew just 1.3% in 2008, down from 2% in 2007 and marking the slowest growth since the 2001 recession.

In other news, Bloomberg wire services reported the United Steelworkers union plans to reject a contract offer from Royal Dutch Shell PLC, which could trigger a nationwide strike by 30,000 refinery workers. That would affect two-thirds of US refining capacity, although white-collar employees would keep the units running. The current contract expires shortly after midnight Jan. 31.

The potential strike may be "a case for some prudent short covering," but "we do not view the risk of strike in the US high enough to make a case of length on only that basis," said Jakob at Petromatrix. "In Europe, however, walk-outs seem to be spreading at different UK refineries (Lindsey, Grangemouth) in protest of the use of 'foreigners' for maintenance and upgrading work ('foreigners' in the UK English means Europeans from the Continent)," he said.

Energy prices
The March contract for benchmark US light, sweet crudes dropped 72¢ to $41.44/bbl Jan. 29 on the New York Mercantile Exchange. The April contract dipped 3¢ to $46.04/bbl. Subsequent monthly contracts for crude posted gains, however. On the US spot market, WTI at Cushing was down 72¢ to $41.44/bl. Heating oil for February inched up by 0.68¢ to $1.43/gal on NYMEX. For the same month, reformulated blend stock for oxygenate blending (RBOB) gained 4.74¢ to $1.23/gal.

"RBOB gasoline managed to break the resistance of $1.20/gal, something it had tried to do for most of 2009, and this commodity has been for most of this week the primary source of support to the oil complex," Jakob said. More volatility in prices was expected Jan. 30 with the expiration of February contracts for petroleum products.

"The US will now enter the fuller phase of refinery maintenance and with Cushing pushing WTI at a deeper discount to Brent, the US gasoline cracks have to readjust higher to maintain the minimum import flows of gasoline," said Jakob.

The new front-month March contract for natural gas climbed by 15.6¢ to $4.58/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 2.5¢ to $4.82/MMbtu.

In London, the March IPE contract for North Sea Brent crude was up 50¢ to $45.40/bbl. Gas oil for February increased $4.75 to $443/tonne.

The average price for OPEC's basket of 12 reference crudes advanced 50¢ to $41.21/bbl Jan. 29.

Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

MARKET WATCH: NYMEX oil drops, ending 4-day rally

02/05/2015 Crude oil prices dropped on the New York market Feb. 4 to settle below $50/bbl and to end a 4-day rally after a weekly government report showed oil...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...

MARKET WATCH: NYMEX crude oil prices reach 2015 high

02/04/2015 Crude oil prices surged more than $3/bbl on the New York market Feb. 3, closing at the highest level so far this year, but some analysts believe th...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...

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



Global LNG: Adjusting to New Realties

When 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

When 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



On Demand

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