MARKET WATCH: Economic slowdown undermines crude oil prices

The front-month crude oil contract fell 1.8% Mar. 22 on slowdowns in Chinese and European manufacturing, wiping out the gain from the previous session in the New York market.

“Also fueling [an] energy stock selloff was the weekly natural gas report of a larger-than-expected injection that sent the commodity down nearly 4%,” said analysts in the Houston office of Raymond James & Associates Inc.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “The oil market came under heavy pressure yesterday following downbeat Purchasing Manager Index (PMI) surveys from both China and Europe, including the Euro-zone’s main economic engines, Germany and France. The PMI surveys suggested that the manufacturing industries in China and Europe are likely to contract in the coming month.”

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “With current oil prices this is very probably just the beginning of the economic slowdown as many emerging countries have still to adjust their domestic oil prices or face greater subsidy pulls on the budget. If oil prices were under pressure yesterday, they are not out of their recent trading range, and a hard sell-off remains difficult when the markets have also to price the potential for an upcoming war with Iran. The Saudi oil minister might be right in saying that current fundamentals do not justify the current price of oil, but the futures markets is anticipatory by nature and is currently pricing the incapacity of Saudi Arabia to replace Iran when that country is taken out. That disconnect between the current supply and demand and the anticipated supply and demand should in our opinion continue to work against a backwardated structure.”

The European Union is expected to rule today that when its embargo takes effect July 1 European companies can issue insurance on cargoes of Iranian crude not sailing towards Europe. “Meanwhile, it is interesting to note that China is becoming increasingly irritated against the US-EU embargo and sanctions against Iran,” Jakob said. “China is now more dependent on the Persian Gulf area than the US and having the West control what oil comes out…of that region will become an increasing source of tension this year and in the years to come between China and the West.”

Government officials from France, South Korea, and the UK recently were quoted by the press as considering a release of strategic petroleum reserves as a means of bringing down oil prices, although the International Energy Administration dismissed speculation of “imminent” action.

Zhang said, “The front-end of the Brent curve remained firm, supported by positive refining margins in Europe…. Good refining margins also appear to have halted the rapid decline in the Urals price differential over dated Brent.”

He reported total petroleum product stocks in the Amsterdam-Rotterdam-Antwerp region and in Singapore are at the high-end of their respective 5-year ranges. “Gasoline stocks in Europe and middle-distillate stocks in Asia are the only two main product groups showing relatively low stocks by historical standards,” he said. “This suggests that high margins are not really driven by improved product demand but rather by reduced refining capacity and the weakness in physical crude prices such as the very low Urals differential.”

In other news, industry officials and analysts dismissed President Barack Obama’s Mar. 22 campaign stop in Cushing, Okla., as essentially a photo opportunity. “There was nothing more in the speech than the commitment to have federal authorities do their best to allow as quickly as possible the start of the construction of the XL pipeline from Cushing to the US Gulf Coast. That will not change much given that federal authorization was not supposed to be any problem for that leg of the pipeline,” Jakob said.

Energy prices

The May contract for benchmark US light, sweet crudes fell $1.92 to $105.35/bbl Mar. 22 on the New York Mercantile Exchange. The June contract dropped $1.91 to $105.84/bbl. On the US spot market, West Texas Intermediate at Cushing was down $1.52 to match the $105.35/bbl front-month futures closing on NYMEX.

Heating oil for April delivery declined 3.75¢ to $3.18/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 1.75¢ to $3.34/gal.

The April natural gas contract returned to its downward trend, dropping 9.1¢ to $2.27/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5¢ to $2.14/MMbtu.

In London, the May IPE contract for North Sea Brent retreated $1.06 to $123.14/bbl. Gas oil for April fell $13 to $1,013.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $1.12 to $121.79/bbl.

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

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


Cognitive Solutions for Upstream Oil and Gas

When 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


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


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