Little change in crude prices

Sam Fletcher
OGJ Senior Writer

There has been little change in absolute prices for crude that have settled at similar monthly averages, “while the main current dynamics relate to spreads,” said Paul Horsnell, managing director and head of commodities research at Barclays Capital in London.

Average prices in recent months for North Sea Brent crude show “how profound the lack of action has been,” Horsnell reported Sept. 9. In May, the front-month IPE contract for Brent averaged $77/bbl, dropping to $75.66/bbl in June and $75.36/bbl in July before rising to an average $77.12/bbl in August, “which also happens to be the same as the average for September-to-date,” Horsnell said.

“The range of the monthly Brent averages from May to August was just $1.76 this year, while in 2009 it was $14.47/bbl and in 2008 it was $19.33,” he said, adding, “Indeed, the previous time the range for the averages over the Northern Hemisphere summer was less than $2 was 1997, when the absolute level of prices was just $18/bbl.”

To find a summer that can match 2010 in terms of the lack of percentage variation in monthly averages, Horsnell said, “One has to go all the way back to 1985, when…it was all looking a bit grim.”

Brent gained 43¢ to close at $78.17/bbl on Sept. 8, “and the average for the year-to-date is $77.82/bbl while the quarter-to-date average is $76.34/bbl,” said Horsnell. “There is, in other words, not a lot of variation in any of those numbers. Indeed, since October 2009, the monthly Brent average has been between $73 and $80 in every month, apart from the surge above $85/bbl for the April average.”

Meanwhile, he said, “The prompt WTI contango has widened sharply just as the prompt Brent contango has all but disappeared, as some divergent regional fundamentals have come into play. In our view, the widening of the WTI spread seems overdone in that it has already fully priced in a large eventual build in Cushing, Okla., inventories, the true scale of which is still open to major questions, especially given the fall in Midwest inventories as a whole.”

The October-November WTI spread settled Sept. 8 at a contango of $1.70/bbl, “having widened by $1 over the past 2 weeks alone,” he said. “In sharp contrast, the October-November Brent spread settled at a contango of just 5¢, having narrowed by 50¢ over the past 2 weeks.”

Within Europe, Horsnell said, “The prompt crude market remains tight, reinforced by downside surprises to North Sea output relative even to fairly humble expectations and by the absence of significant European inventory surpluses. However, the major factor behind the sharp widening in WTI spreads is, in our view, somewhat overblown market expectations of significant crude builds in Cushing.”

OPEC’s anniversary
An oil conference started Sept. 10, 1960, in Baghdad that culminated 4 days later with the creation of the Organization of Petroleum Exporting Countries by its five founding members, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Since then, Horsnell said, “The impending weakening and death of OPEC has been foretold by analysts and press on a repeated basis over the intervening years.” Now, some 50 years later, some cynics still tend “to write off OPEC’s relevance, understate the cohesion of its aims, and to play down its effectiveness as an influence on prices,” he said.

However, Horsnell said, “Throughout the latest economic cycle, it is very difficult to make the case that OPEC has not been effective in defending prices.” He cited Energy Information Administration estimates the 11 OPEC members with quotas produced 27.16 million b/d in August, “the same as in July and 50,000 b/d higher than in June.” He said, “Output is still 2.26 million b/d lower than the peak reached in mid-2008 before the financial and economic crisis deepened, and it currently stands just 250,000 b/d higher year over year.” He reported “no convincing evidence of any loss of production discipline this year.”

(Online Sept. 13, 2010; author’s e-mail: samf@ogjonline.com)

Related Articles

MARKET WATCH: NYMEX crude oil prices drop for fifth consecutive trading session

07/09/2015 US light, sweet crude oil prices settled slightly lower on the New York market July 8 for the fifth consecutive trading session, and analysts attri...

Ending crude export ban would help rural US areas, House panel told

07/09/2015 Rural US communities generally have benefited from the nation’s crude oil production renaissance, and potentially could be helped more if restricti...

MARKET WATCH: Brent oil prices climb; NYMEX oil price holds below $53/bbl

07/08/2015 US light, sweet crude oil prices settled slightly lower on the New York market July 7 to remain under $53/bbl as Brent crude oil prices gained mode...

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...

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 ...

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...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

MARKET WATCH: NYMEX oil prices fall on rise in US rig count

07/06/2015 US light, sweet crude oil prices edged down going into the July 4 holiday weekend on the New York market after Baker Hughes Inc. reported July 2 th...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...
White Papers

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

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
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 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.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When 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.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

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