MARKET WATCH: Dubai financial crisis undercuts oil price

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 30 -- Crude prices were relatively flat in early trading Nov. 30 in the New York market after falling 2.5% Nov. 27 after the Dubai World holding company’s pre-Thanksgiving announcement it would seek at least 6-month reprieve on repayment of $60 billion in debts. The company is flag bearer for Dubai in global investments.

In Houston, however, analysts at Raymond James & Associates Inc. said, “The UAE’s recent statement that it would back lenders against a possible default by the conglomerate has helped to calm the situation. Prior to the opening bell, markets appeared to be focusing on these positive developments despite breaking news that yet another supertanker headed to the US has been hijacked off the coast of Somalia.”

They reported, “Last week natural gas prices popped nearly 10%, and gassy stocks were up about 5% in a relatively flat broader market tape. One of the primary catalysts of this move was the increasing awareness of a potentially bullish Energy Information Administration gas supply data to be released today.” Raymond James said, “Given the strong gas stock move last week, it now appears that market expectations are already factoring in a bullish number.”

In New Orleans, analysts at Pritchard Capital Partners LLC said, “The reversal in natural gas could also be attributed to comments from PetroChina Co. Ltd. that China will not be able to maintain natural gas supplies in December and January if current consumption trends continue. It is reported that pressure in China’s gas pipelines has fallen to the lowest level required to maintain minimal operations. The Chinese have curtailed natural gas supplies to industrial users in order to meet residential demand. This report should reduce concerns regarding LNG shipments to the US, and support the recent gains in the US natural gas price.”

US dollar outlook
Olivier Jakob at Petromatrix, Zug, Switzerland, said fear of a financial default by Dubai erased most of the energy equity gains earlier last week on world markets. The falling US dollar on Nov. 25 “did bring some support to crude but not enough to bring it back to its longer term correlation value,” he said.

At KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, analysts noted the US dollar closed Nov. 25 “at its weakest level ($1.505) vs. the euro since Aug. 7, 2008.” They reported, “Two reasons were widely cited for this: first, a statement by the Federal Reserve that the recent decline of the dollar is seen as ‘orderly,’ suggesting that it has official approval of a kind; second, an extraordinary announcement by the Russian central bank that it was considering investing ‘some’ of its foreign exchange reserves in the Canadian dollar.” They described it as “the latest twist in the slow death of the dollar.”

Jakob said, “The only time we experienced such a low dollar was in the first half of last year and what followed was a recession of historic proportion. It is now cheaper for the European consumer to buy European-made products in the US and to import them back to Europe, and at the current value of the euro it is becoming more likely that European exports will start to falter and the European economy recovery will have to wait a little longer. The dilemma now becomes: how do you continue to sell the dollar to support the market price of equities and commodities without hurting the fundamentals of equities and commodities?”

He added, “In the week ending Nov. 18, cash assets hoarded by banks in the US increased by $30 billion and are still close to $1 trillion above the levels of the same weeks in 2007. It is that much money that has not worked its way back to the real economy as US bank loans are still in a declining trend.”

Pritchard Capital Partners said, “As the market sentiment for the dollar remains negative, which bodes well for crude prices, increased geopolitical risk could spark a sharp rally in the dollar, similar to what the market saw in July 2008 when the US Dollar Index climbed roughly 16 points over a 4-month period while crude oil dropped from its cyclical highs. While a rally in the dollar would likely pressure the commodity trade, crude oil specifically, we believe increased US and BRIC [Brazil, Russia, India, and China] demand will keep prices from repeating the 2008 collapse in crude.”

KBC analysts said, “We keep making the point that for the developed economies there is little sign that demand is improving—yet. Everybody talks about demand recovery but lift-off keeps being postponed.”

Energy prices
The January contract for benchmark US light, sweet crudes dropped $1.91 to $76.05/bbl Nov. 27 on the New York Mercantile Exchange. The February contract was down $1.83 to $77.36/bbl. Heating oil for December delivery declined 2.79¢ to $1.96/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month fell 7.14¢ to $1.93/gal.

The January natural gas contract gained 2.9¢ to $5.19/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was unchanged at $3.57 MMbtu.

In London, the January IPE contract for North Sea Brent crude was up 19¢ to $77.18/bbl. Gas oil for December dropped $5.75 to $605/tonne.

Contact Sam Fletcher at

Related Articles

EIA: US oil output fell 50,000 b/d in May

07/07/2015 Total US crude oil production dropped 50,000 b/d in May compared with April and is expected to continue falling through early 2016 before growth re...

BLM approves ROW for Elko gas pipeline expansion project

07/07/2015 The US Bureau of Land Management’s Tuscarora, Nev., field office signed a decision record approving a right-of-way for Paiute Pipeline Co.’s (PPC) ...

Obama urged by IPAA president to lift ban on US crude exports

07/07/2015 Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of ...

AER shuts in 16 Murphy Oil sites in Peace River region for noncompliance

07/07/2015 Alberta Energy Regulator said it has shut in or partially shut in 16 sites operated by Murphy Oil Co. Ltd. in the Peace River region. The sites wer...

MARKET WATCH: NYMEX, Brent oil prices take dive on world oil oversupply concerns

07/07/2015 US light, sweet crude oil prices plummeted more than $4/bbl on the New York market July 6, marking a 5-month low, while Brent crude oil prices on t...

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


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