MARKET WATCH: Crude prices slip in second session

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 16 -- Energy prices fell in a second consecutive trading session Nov. 13 with crude touching a 1-month low in intraday trade in the New York market following reports of bigger-than-expected increases in US inventories of crude, gasoline, and distillate fuels.

The Energy Information Administration said US commercial benchmark crude inventories increased by 1.8 million bbl to 337.7 million bbl in the week ended Nov. 6, with gasoline stocks up 2.5 million bbl to 210.8 million, and distillate fuel inventories increased 300,000 bbl to 167.7 million bbl, triggering a 3% drop in the Nov. 12 price of crude (OGJ Online, Nov. 13, 2009).

In New Orleans, analysts at Pritchard Capital Partners LLC said, “Crude oil held the $75[/bbl] level in Friday’s trade, but early gains were reversed due to a lower consumer confidence reading from the University of Michigan and comments from the…ExxonMobil Corp. [Chief Executive Officer] Rex Tillerson that record-high inventories around the globe will not be dented by winter seasonal demand. He added that he saw a ‘disconnect’ between the price of crude and the supply/demand picture for crude.”

Pritchard Capital analysts said, “The counter to Tillerson’s comments are growing demand figures out of China that were highlighted by [the Nov. 13] report that China’s power consumption is up 16% from 2008, and growing murmurs that the International Energy Agency (IEA) is exaggerating future global oil production—one report suggests oil production in 2030 will be closer to 75 million b/d vs. the 105 million b/d estimate.”

Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported a rebound in crude prices in early trading Nov. 16 “driven by news…that the world's second-largest economy [China] beat expectations and grew at an annual rate of 4.8% in the third quarter.” They said, “Additionally, a declining dollar and growing speculation that the Organization of Petroleum Exporting Countries will leave production unchanged at its December meeting are helping to fuel crude's rally. Natural gas is also trading slightly higher today as a cold front brings an early-season snowfall to the Central Plains and parts of the Midwest.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The dollar index was pushed down…during the week and as well in overnight trading before the start of this week. There is not much else than the dollar index driving the global markets and not many solutions for the macrotraders than to continue selling the dollar if they want to maintain the positive returns on equities for the end of the year mark. The Nov. 13 close of West Texas Intermediate was the only noticeable outlier deviation to the calculated value based on the eurodollar correlation 2009 model. Based on the correlation model WTI should have been priced at $78/bbl rather than $76.35/bbl, hence it has some catching up to do as the euro tries again this morning to break the resistance of 1.50.”

Jakob also noted, “Peace continues to hold in the Nigerian Delta and over the weekend the managing director of the Nigerian National Petroleum Corp. was quoted in the local press as saying that crude oil production reached 2.4 million b/d Nov. 12. This compares with 1.9 million b/d used by the IEA for the October estimates.”

He advised, “One must always apply some caution to the quoted numbers out of the Nigerian press.” But “one way or another,” Jakob said, “we will see higher output in Nigeria over the next 3 months than over the last 6 months, and with their higher yields for light products these barrels will displace a considerable amount of heavier crude oil from the Middle East. It is not necessarily a coincidence that Saudi Arabia has restarted supplying term contracts to some Asian refiners, as they should face some competition in coming months from the increased Nigerian supplies.”

At KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, analysts said, “The Saudis have reminded us in two ways why they are still major players in world oil markets. First, it was reported that Saudi Arabia will sell more crude oil to certain Asian customers and to major oil companies with global refining operations. In typical style the Saudi’s signal is not glaring; instead it is a subtle indication that they do not want to see oil prices rise too far, too fast, and risk damaging economic recovery. Specialist tanker tracking consultants reported that other OPEC countries have gradually increased shipments, but only to Asia where demand is growing and not to Europe and the US where demand remains very weak. This all means that compliance with OPEC’s 4.2 million b/d of output cuts has fallen to no more than about 63% compared [with] 80% earlier this year. With the benefit of hindsight it now looks as if OPEC’s cuts would have been far too severe had they been implemented. But they have done the job. The news of higher volumes from Saudi Arabia, combined with weak demand numbers from the US, helped send the front month WTI price down to is lowest close for a month on Thursday, albeit still a healthy $76.94/bbl.”

KBC analysts said, “The second way in which the Saudis demonstrated their muscle was when Saudi Aramco’s head of refining revealed…that two new refineries which will each process 400,000 b/d of Arab Heavy crude oil—Jubail, where Total is Aramco’s partner, and Yanbu, where ConocoPhillips is the partner—will go ahead having been postponed a year ago. In the meantime, there were tough negotiations between Saudi Aramco and the majors which yielded reported cost cuts of $2 billion for Jubail and a figure thought to be even higher for Yanbu. The revised project costs are about $10 billion each, still big bucks of course, but the recession has provided an opportunity for sponsors of big projects to force project-hungry bidders to cut their bills.”

At the Center for Global Energy Studies (CGES), London, analysts said, “With the passage of every week, evidence seems to be building that the world economy is now in the recovery room. Not so long ago we were told that US GDP in the third quarter had grown over the previous quarter by more than 3% at an annualized rate. Now we are informed that Chinese industrial production surged by 16% year-on-year in October and rises in the Baltic Dry Index suggest that world trade is picking itself slowly off the floor.”

However, CGES analysts said, “Despite such welcome tidings, the oil industry faces more confusion and uncertainty with the appearance in the news last week of two oil-related items having very different longer-term implications. On the one hand, there was the publication of the IEA's 2009 World Economic Outlook, which frightened everyone with its call for over $10 trillion of additional investments in energy infrastructure and energy-related capital stock to avert catastrophic climate change. On the other, there was the news that Iraq had agreed with a consortium led by Eni SPA to expand output at its giant Zubair oil field. New capacity from this field, when added to additional production from other massive Iraqi fields, means that in 7-10 years Iraq will be able to produce at least 8 million b/d, placing it among the world's largest oil producers, second only to Saudi Arabia in OPEC. We have in these two items the kernel of a severe problem that will surely increase by many notches the existing stresses and strains in the oil business.”

Energy prices
The December contract for benchmark US light, sweet crudes traded as low as $75.57/bbl Nov. 13 on the New York Mercantile Exchange but managed to close at $76.35/bbl, down 59¢ for the day. The January contract dropped 62¢ to $77.03/bbl. On the US spot market, WTI at Cushing, Okla., declined 59¢ to $76.35/bbl. Heating oil for December delivery lost 2.49¢ to $1.97/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month declined 2.43¢ to $1.92/gal.

The December natural gas contract gained 2.2¢ to $4.39/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., fell 68¢ to $2.52/MMbtu. Natural gas rose in the futures market despite a larger than expected storage injection of 25 bcf vs. an 16 bcf estimate.

“However, the real noise in the natural gas market was the divergence between NYMEX natural gas and the natural gas hubs where the natural gas is sold,” said Pritchard Capital Partners. “According to Bloomberg quotes the main natural gas hubs across the US were down 20-30%. …The divergence in prices between the Hubs and NYMEX could be attributed to the futures rolls of the US Natural Gas Fund. The December front month NYMEX contract expires on Nov. 24, but based on the prices on the hubs it is possible that NYMEX natural gas could trade lower early next week. The low price of the hubs indicates natural gas is approaching full storage as it always does during this period every year.”

In London, the December IPE contract for North Sea Brent crude was down 47¢ to $75.55/bbl. Gas oil for December lost $4.25 to $611/tonne.

The average price for OPEC’s basket of 12 reference crudes dropped 80¢ to $75.26/bbl on Nov. 13. So far this year, OPEC’s basket price has averaged $59.05/bbl.

Contact Sam Fletcher at

Related Articles

ConocoPhillips revises down $2 billion from budget

01/29/2015 ConocoPhillips has shed an additional $2 billion from its capital expenditures for 2015, decreasing total spending to $11.5 billion from the previo...

Chevron, BP, ConocoPhillips join to explore, appraise Gulf of Mexico leases

01/28/2015 Chevron Corp. subsidiary Chevron USA Inc., BP PLC unit BP Exploration & Production Inc., and ConocoPhillips Co. have pledged to work together t...

Conoco's Lance calls for repeal of US crude oil export ban

01/26/2015 The US crude export ban that was imposed in 1975 should be repealed 40 years later to ensure the US oil and gas renaissance continues, ConocoPhilli...

For the US economy, a falling oil price has drawbacks, too


Cheer in the US about an economic lift from falling oil prices needs qualification.

ConocoPhillips slashes 2015 capital budget

12/22/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year's budget. The news comes on the hee...

ConocoPhillips slashes 2015 capital budget

12/08/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year’s budget. The news comes on the hee...

BLM issues final SEIS for Greater Mooses Tooth project in NPR-A

10/30/2014 The US Bureau of Land Management released its final supplemental environmental impact statement for the proposed Greater Mooses Tooth (GMT1) oil an...

Western gulf lease sale attracts $110 million in high bids

08/20/2014 Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in ...

ConocoPhillips, Enap sign deal to study unconventional oil, gas in Chile

08/06/2014 ConocoPhillips and Chile’s state oil company Empresa Nacional del Petroleo (Enap) have signed a technical agreement to jointly conduct geological, ...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

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...
Available Webcasts

The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.


On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 


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?


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.


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