MARKET WATCH: Crude oil futures price tumbles below $80/bbl

Sam Fletcher
OGJ Senior Writer

HOUSTON, Oct. 20 -- The front-month crude oil contract fell 4.3% to below $80/bbl Oct. 19 in what was both the largest 1-day dollar and percentage decreases in the New York market since February, as China—the world’s biggest oil consumer—raised interest rates to rein in its rapidly growing economy.

“The broader markets got the message, with the Standard & Poor’s index falling 1.6% and the Dow Jones Industrial Average down 165 points,” said analysts in the Houston office of Raymond James & Associates Inc. “With the backdrop of declining equities, falling crude prices, and $3.50/Mcf gas, there was little hope for any energy stocks.”

Natural gas was still climbing in early trading Oct. 20 while crude was trying to regain some of its loss.

“Yesterday all the risk factors converged: the day started with overall pressure on equities…, the Chinese increase in rates forced the dollar higher with the known consequence linked to the correlations, and finally the news that the New York Federal Reserve Bank and a few large institutions were attacking Bank of America over mortgages pullbacks reminded everyone that all is not yet clear in the mortgages foreclosure crisis. The large speculators are holding record length in West Texas Intermediate and when and if they want to reduce their exposure, they have to do it in a vacuum,” said Olivier Jakob at Petromatrix, Zug, Switzerland.

Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, reported, “The dollar surged 1.5% against the euro yesterday while Chinese central bank raised its benchmark rate by 25 basis points and tightened its monetary policy, lifting its 1-year lending rate to 5.56% from 5.31%.”

Sharma said, “We believe that prices have now have pulled back to a more fundamentally sound level due to the loose supply-demand situation; however, currency markets will continue to dictate crude’s direction in the near term while the major economies tune up their monetary policies.”

The price of gas advanced in the futures market as “meteorologists changed their minds about the weather outlook,” Sharma said, adding, “Temperatures are now expected to drop below normal in the Midwest and the Southeast towards the end of the month.”

Gas prices fell Oct. 18 “after the weather models showed that the benign weather would continue across the country over the next 2 weeks,” he said. “Prices also found support from bargain hunting yesterday. However, the sentiments remain somber in the natural gas complex as the National Oceanic and Atmospheric Administration has forecast that this winter would be 3% warmer than the last winter, which was 2% colder than normal (based on the gas-home customer weighted heating degree days).”

At Standard New York Securities Inc., the Standard Bank Group, Walter de Wet said, “The oil market took a big knock yesterday.” However, he added, “Given the lagging effect of the interest rate, these increases are unlikely to have much immediate effect on the economy or energy demand. Nevertheless, all oil front-month future contracts fell by more than 4% on the day. We believe that this signals an oil market that is lacking the support of supply and demand fundamentals. The development yesterday was in stark contrast to that on [Oct. 18] when the oil market simply brushed aside the negative US September industrial production index, the first decline since the US recession ended in June 2009. Our research shows a strong correlation between oil demand and industrial production, as one would expect.”

US inventories
The Energy Information Administration said Oct. 20 commercial inventories of US crudes increased by 700,000 bbl to 361.2 million bbl in the week ended Oct. 15, less than half of the Wall Street consensus for a 1.5 million bbl gain. Gasoline stocks grew 1.2 million bbl to 219.3 bbl, opposite market expectations for a 1.5 million bbl drop. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories fell 2.2 million bbl to 170.1 million bbl, surpassing Wall Street’s expectations for a 1 million bbl loss.

Imports of crude into the US increased by 472,000 b/d to 8.6 million b/d last week. Total gasoline imports averaged 779,000 b/d; distillate fuel imports averaged 140,000 b/d. In the 4 weeks ended Oct. 15, crude imports averaged 8.7 million b/d, 350,000 b/d less than in the comparable 4-week period in 2009.

The input of crude into US refineries inched up just 47,000 b/d to 14 million b/d in the week ended Oct. 15, with units operating at 82.5% of capacity. Gasoline production increased to 9 million b/d while distillate fuel production remained virtually unchanged at 4.2 million b/d.

Energy prices
The November contract for benchmark US light, sweet crudes dropped $3.59 to $79.49/bbl Oct. 19 on the New York Mercantile Exchange. The December contract fell $3.64 to $80.16/bbl.

On the US spot market, WTI at Cushing, Okla., was down $3.59 to $79.49/bbl. Heating oil for November delivery decreased 8.68¢ to $2.19/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 10.32¢ to $2.05/gal.

The November natural gas contract gained 8.2¢ to $3.51/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 2.5¢ to $3.40/MMbtu.

In London, the December IPE contract for North Sea Brent crude lost $3.27 to $81.10/bbl, still at a premium to WTI. Gas oil for November dropped $11.25 to $704/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 27¢ to $79.30/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Market watchers' adjustments offer hints of recovery

01/26/2015 Because markets look ahead, changes in standard forecasts offer potentially important signals during storms such as the one now pummeling the oil a...

A message from Oil & Gas Journal

12/15/2014

An important transition occurred during production of this issue of Unconventional Oil & Gas Report.

MARKET WATCH: Crude oil prices down as US government shutdown lingers

10/16/2013 The front month crude oil contract on the New York market dropped to the lowest level on Oct. 15 since it last settled below $100/bbl on July 2.

MARKET WATCH: Crude oil traded higher amid Washington budget talks

10/15/2013 Crude oil futures prices traded higher on the New York market Oct. 14 as US lawmakers reported progress in ongoing efforts toward reaching an agree...

MARKET WATCH: Oil prices close down at end of volatile week

10/14/2013 The NYMEX November crude contract lost 99¢ on Oct. 11, settling at $102.02/bbl ending a week of volatile trading. The December contract fell 83¢ to...

MARKET WATCH: Oil prices continue falling as Syria risk apparently lessens

09/17/2013 Oil futures prices reached their lowest level in 3 weeks with the Sept. 16 closing while the US and Russia agreed to terms under which Syria is exp...

MARKET WATCH: Oil prices rebound slightly awaiting US decision on Syria

09/04/2013 Oil prices climbed on New York and London markets Sept. 3 in response to comments indicating key US lawmakers will support US President Barack Obam...

MARKET WATCH: Syria crisis puts pressure on some oil markets

08/27/2013 Crude oil prices in world markets edged upwards Aug. 26 on reports that “tolerance of the West for what’s taking place in Syria appears to be comin...

MARKET WATCH: Oil futures rise Aug. 23 on Lebanon violence

08/26/2013 Oil futures prices rose on the New York market Aug. 23, and traders attributed the increase to escalating violence in the Middle East that added to...
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.

register:WEBCAST



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. 

register:WEBCAST


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


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