MARKET WATCH: Crude declines in mixed market in 2011's final trading session

The front-month crude contract climbed to $100.16/bbl in intraday trading Dec. 30, 2011, but couldn’t sustain at that level, dipping into the red below $99/bbl for the day in the New York market. Natural gas continued its downward slide.

The biggest development last week “for relative values” was the freezing of the credit lines for the Petroplus Holdings AG refining system in Europe. Olivier Jakob at Petromatrix in Zug, Switzerland, said, “It did not take very long for Petroplus to start shutting down some of its refineries (Belgium, France, and Switzerland), and there is still a high risk that the Petroplus refineries in the UK and Germany also close down (OGJ Online, Dec. 30, 2011).

He said, “The shutdown of 700,000 b/d of refining capacity on the US East Coast was supposed to be a key supply-and-demand input for the first half of 2012, but the closing of the Petroplus system is a double-up on lost refining capacity.”

Jakob noted, “European demand for oil products is suffering due to the combination of record high retail oil prices and high unemployment, but the amount of refining capacity lost in the northern Atlantic Basin is significant and should provide in our opinion a positive support to the product cracks.” He reported, “The latest oil demand for Spain shows gasoline consumption down 8.1% vs. November 2010 while diesel is down 7.6%.” He said November gasoline sales also were down from year-ago levels in France and Italy.

Jakob said, “The other side of the Petroplus coin is that it takes away some more demand for crude oil in the northern Atlantic Basin. Petroplus was a buyer of a mix of Russian and sweet crude oil, and that lost demand will come on top of the lost demand from Conoco and Sunoco [refinery closures] on the East Coast at the same time that the Libyan crude oil production is getting closer to pre-war levels. Following the news of the Petroplus debacle, the Russian crude oil differentials fell off a cliff while differentials for Forties [field crude] also lost the recently added gains. Exports out of Libya’s Es-Sider [terminal] are reported to be restarting, and that is another ‘better than expected’ story out of Libya.”

He said, “The Brent front spread has therefore weakened…and in our opinion will be put under more pressure if exports out of Es-Sider start to increase from the first two tentative cargoes.”

In other news, Iran carried out a military exercise Jan. 2 after US President Barack Obama signed sanctions Dec. 31, 2011, against that country's central bank. Iran is the second-largest producer among the Organization of Petroleum Exporting Countries, with estimated output of 3.6 million b/d. “More importantly, the Strait of Hormuz located between Oman and Iran is by the far the most critical chokepoint for global oil market, with a daily oil flow of almost 17 million bbl in 2011. According to the US Department of Energy, flows through the strait in 2011 were roughly 35% of all seaborne traded oil, or almost 20% of oil traded worldwide,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group.

2012 outlook

The European debt crisis “remains the main story” as 2012 kicks off, said analysts in the Houston office of Raymond James & Associates Inc. They reported, “Oil gained 8.2% over the year, while natural gas futures were down 32.1% on the year.”

Raymond James analysts said, “For years we've been bearish on US natural gas prices and bullish on global oil prices. That was the right call in 2011—yet again—and we believe it will remain so in 2012. For oil, we find it impossible to make a near-term directional call until the European crisis reaches some resolution, hence our relatively cautious forecast of $92.50/bbl for West Texas Intermediate and $100/bbl for Brent. Long-term fundamentals remain healthy, however; our initial 2013 forecast is $105/bbl WTI and $110/bbl Brent.”

They said, “Huge increases in demand would be needed to rebalance the natural gas market this year, and we just don't think this is realistic. Hence, our 2012 forecast declines to $3.25/Mcf (our third cut within 3 months), and we are initiating a 2013 forecast of $4/Mcf.” As for corporate stocks, they said, “After a year when most energy stocks lagged the broader market, we believe energy stocks are generally poised for gains in 2012.”

Zhang said, “After a rollercoaster 2011, the oil market is facing further volatility in 2012. Geopolitical risk and the Euro-zone debt crisis are likely to remain the two most important themes this year. We are constructive on oil prices, but maintain that volatility will stay elevated. Refining margins are likely to bottom out as excessive capacity is removed.”

Energy prices

The February and March contracts for benchmark US sweet, light crudes dropped 82¢ each to $98.83/bbl and $99/bbl, respectively, Dec. 30 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing, Okla., also was down 82¢ to $98.83/bbl in line with the front-month futures price.

Heating oil for January delivery, however, increased 1.75¢ to $2.94/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.62¢ to $2.69/gal.

The February natural gas contract lost 3.8¢ to $2.99/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 1.6¢ to $2.96/MMbtu.

In London, the February IPE contract for North Sea Brent retreated 63¢ to $107.38/bbl. Gas oil for January gained $2.50 to $924/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 9¢ to $106.84/bbl. OPEC’s basket price averaged $107.46/bbl for 2011, up from $77.45/bbl in 2010.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Chinese regulators approve Sinopec’s plan for grassroots refinery

02/06/2015 China’s National Development and Reform Commission (NDRC) has approved Sinopec Beijing Yanshan Petrochemical Co. Ltd., a subsidiary of China Nation...

BOEM schedules public meetings about draft proposed 5-year OCS plan

02/06/2015 The US Bureau of Ocean Energy Management will hold the first of 20 public meetings in Washington on Feb. 9 to receive public comments on potential ...

Union strike ongoing at US refineries as negotiations continue

02/06/2015 A strike by union workers at nine US refining and petrochemical production plants remains under way as the United Steelworkers Union (USW) continue...

NCOC lets $1.8-billion pipeline contract for Kashagan field

02/06/2015 North Caspian Operating Co. (NCOC) has let a $1.8-billion engineering and construction contract to ERSAI Caspian Contractor LLC, a subsidiary of Sa...

AOPL releases 2015 safety performance and strategic planning report

02/06/2015 The Association of Oil Pipe Lines is committed to further improvements despite a 99.99% safe petroleum liquids delivery rate, AOPL Pres. and Chief ...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...

Congressional Republicans renew bid to halt sue-and-settle maneuvers

02/05/2015 Calling it an affront to regulatory accountability that results in unchecked compliance burdens, US Sen. Charles E. Grassley (R-Iowa) and US Rep. D...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...
White Papers

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...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

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


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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