MARKET WATCH: Sell-off pulls down WTI, Brent crude prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, Feb. 7 -- Energy markets fell Feb. 4 with benchmark crudes dropping below $100/bbl in London and under $90/bbl in New York as traders positioned themselves in case Egyptian President Hosni Mubarak might have been ousted over the weekend, reducing a possible geopolitical threat to world oil supplies.

Natural gas prices fell as the National Weather Service's forecast for Feb. 12-16 is for above-average temperatures throughout the central and eastern thirds of the country after unusually frigid temperatures last week.

Meanwhile, officials from the Mubarak administration began negotiations over the weekend with some of the demonstrators in an attempt to delay Mubarak’s departure until elections later this year. “The unrest in Egypt appears to have quieted down to some extent, with Egyptian banks reopening for the first time in more than a week. Fears of disruption to the Suez Canal and Sumed (Suez-Mediterranean) Pipeline are receding, while concerns that the spread of the political instability also appear to be dissipating,” reported James Zhang at Standard New York Securities Inc., the Standard Bank Group.

At KBC Energy Economics, a division of KBC Advanced Technologies PLC, analysts cited earlier market fears that mass protests such as those that recently overthrew Tunisia’s dictatorship and will apparently oust Mubarak might spread to oil-producing nations in North Africa and the Middle East. “This has put a geopolitical fear premium of at least $5/bbl back into the price of crude,” they said.

Although the outcome in Egypt is not yet known, KBC analysts noted the only negative effects on the nation’s oil industry have been “the exodus of personnel and transportation difficulties related to the protests.” They said, “The army, which to date has appeared to side more with the protesters rather than the government and its supporters, has secured the Suez Canal area and is ready to act if the turmoil threatens oil and energy infrastructure. So we are likely to see prices revert lower…when the political temperature reduces, particularly given the recent murmurings from the Organization of Petroleum Exporting Countries hinting at more “flexibility” in the face of the latest rally.”

Although OPEC earlier said it saw no need for a production hike that some have called for, Sec. Gen. Abdallah al-Badri recently indicated the possibility of a policy discussion among members Feb. 22 at an International Energy Forum meeting in Riyadh.

Zhang said, “The oil market is likely to continue to be led by political developments in Egypt and the wider Middle East, although perhaps to a lesser extent. Further solid macroeconomic data is likely to continue lending support to oil prices, though currency moves are also likely to play a big role in the coming weeks in shaping the oil market.”

At Barclays Capital Commodities Research in New York, analysts said, “With benchmark oil prices [recently] back above the psychological barrier of $100/bbl, the question of whether the economic recovery will be derailed and oil demand affected has returned with a vengeance.” But after analyzing implications of the recent rise in oil prices on the US economy and US oil demand and assessing potential consequences of further price hikes, they said, “In our view, current price levels do not generate enough attrition to imperil the economic recovery and the progression of US oil consumption.”

WTI-Brent spread
Zhang said the price spread between West Texas Intermediate and North Sea Brent narrowed to $10.80/bbl in Brent’s favor on Feb. 4. “The term structures for both WTI and Brent weakened, with the sell-off being focused towards the front end of the curves,” he said.

US light crude in the New York market “has become largely irrelevant as a benchmark because infrastructure constraints at landlocked Cushing, Okla., delink it from the Gulf Coast market,” said KBC analysts. “WTI has been trading close to $12/bbl discount to broadly similar grades…that can be delivered into the USGC. Particularly as we move out of the spring maintenance season, we should see some gradual narrowing of the discount of WTI futures to other domestic and international grades.” However, they stand by an earlier KBC forecast that “the Brent-WTI spread will remain inverted for at least the next couple of years as volumes through the Keystone pipeline funnel more oil into storage at Cushing.”

Energy prices
The March contract for benchmark US light, sweet crudes fell $1.51 to $89.03/bbl Feb. 4 on the New York Mercantile Exchange. The April contract dropped $1.39 to $91.85/bbl.

On the US spot market, WTI at Cushing was down $1.51 to $89.03/bbl in lock step with the front month futures contract price. Heating oil for March delivery declined 5.07¢ to $2.72/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month lost 6.81¢ to $2.44/gal.

The March natural gas contract decreased 2.7¢ to $4.31/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 18.5¢ to $4.50/MMbtu.

In London, the March IPE contract for Brent crude traded as high as $102.48/bbl in the Feb. 4 session before closing at $99.83/bbl, down $1.93 for the day. Gas oil for February lost $17.50 to $843.25/tonne.

The average price for OPEC’s basket of 12 reference crudes was down 86¢ to $96.85/bbl on Feb. 4. So far this year the OPEC basket price has averaged $93.52/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Inhofe, Lankford say new BIA rules threaten Osage oil operations

07/10/2015 New US Bureau of Indian Affairs regulations that increase production expenses on tribal lands could put the Osage Nation out of business, Oklahoma’...

House panel’s crude export ban hearing weighs urgency against caution

07/10/2015 A US House Energy and Commerce subcommittee hearing on legislation to repeal the ban on exporting US-produced crude oil quickly broke along party l...

Chevron Phillips Chemical makes executive appointments

07/10/2015

Chevron Phillips Chemical Co. LLC has made several executive appointments, all effective Aug. 1.

Twelve workers killed in Nigeria pipeline explosion

07/10/2015 Eni SPA reported that an explosion occurred July 9 at the repair site for the Tebidaba-Clough Creek oil pipeline in Nigeria’s onshore Niger Delta.

Gov. Tomblin forms West Virginia oil, gas safety commission

07/10/2015 West Virginia Gov. Earl Ray Tomblin (D) established the oil and gas safety commission he announced in his 2015 State of the State address. The grou...

MARKET WATCH: NYMEX, Brent crude oil prices rebound more than $1/bbl

07/10/2015 Prices for US light, sweet crude oil and Brent crude each rebounded by more than $1/bbl on their respective markets July 9, and analysts attributed...

Transco seeks FERC approval for New York Bay Expansion project

07/09/2015 Transcontinental Gas Pipe Line Co. LLC (Transco), a wholly owned subsidiary of Williams Partners LP, has filed an application with the US Federal E...

House Oversight panel subpoenas Kerry for Keystone XL documents

07/09/2015 The US House Oversight and Government Reform Committee issued a subpoena to US Sec. of State John F. Kerry for reports, recommendations, letters, a...

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...
White Papers

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

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
Available Webcasts


Driving Growth and Efficiency with Deep Insights into Operational Data

When 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



On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

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