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

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

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