MARKET WATCH: Euro falls to 2-year low, pulling down oil prices

Energy prices generally continued to trickle down in small losses May 29 as the euro tumbled to its lowest level against the dollar in almost 2 years following an international downgrade of Spain’s debt rating.

The broader market rose 1.1% on the hope Greece may remain within the Euro-zone while traders shrugged off a report of weak consumer confidence in the US economy. “Natural gas sank 5% [in the New York market] on worries that the coal-to-gas switching trend may be losing steam,” said analysts in the Houston office of Raymond James & Associates Inc. Energy prices were sharply lower in early trading May 30 as investors eschewed risks, they said.

On May 29, Egan-Jones Ratings Co. downgraded Spain’s credit from Bb– to B. The Spanish government's proposal to shore up the troubled Bankia SA with €19 billion of government bonds also fell through. Spain earlier this month nationalized Bankia, one of the banks most exposed to the collapse in the Spanish property market.

The European Union's executive office has since called for a Euro-zone “banking union" to centrally oversee and, if necessary, bail out the continent's financial system. But European governments with less debt problems fear bank rescues could undermine their stronger economies.

James Zhang at Standard New York Securities Inc., the Standard Bank Group said, “The oil market was again dragged down by the euro with both West Texas Intermediate and Brent falling slightly. The distillate market was also softer, while gasoline made small gains [in New York].” The Brent backwardation weakened on reports crude output from the Organization of Petroleum Exporting Countries hit the highest level in May since 2008, driven by increasing production from Saudi Arabia. Price differentials for physical crude cargoes remained stable, Zhang said.

He said, “The global oil inventory build so far this quarter has been limited. In particular, global oil product stocks have been falling sharply. As refineries set to ramp up run rates, we should expect to see further crude stocks get converted into product stocks. Nevertheless, the rather muted oil inventory build so far this quarter points to a tighter oil market for the rest of this year.”

Zhang said, “The sharp decline in oil prices has been partly driven by supply-demand fundamentals and market sentiment over the Euro-zone debt crisis. For the moment, we see upside risks to oil prices emerging as seasonal demand picks up amid heightening geopolitical risks over Iran. Despite the relatively sharp decline in oil prices, implied volatility remains relatively low by historical standards, which, in conjunction with the more attractive oil prices, provides a good hedging opportunity for consumers. In addition, our bearish view on product cracks means we favor crude rather than products as a consumer hedge.”

Meanwhile, release of the Energy Information Administration’s weekly report on US oil inventories is delayed until May 31 due to the May 28 Memorial Day holiday.

Energy prices

The July contract for benchmark US light, sweet crudes dipped 10¢ to $90.76/bbl May 29 on the New York Mercantile Exchange. The August contract dribbled a 6¢ loss to $91.09/bbl. On the US spot market, WTI at Cushing, Okla., was down 10¢ to $90.76/bbl in lock step with the front-month futures contract.

Heating oil for June delivery declined 2¢ to $2.81/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 1.36¢ to $2.91/gal.

The June natural gas contract fell 13.9¢ to $2.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped to $2.50/MMbtu on May 29 from $2.58/MMbtu when last traded May 25.

In London, the July IPE contract for North Sea Brent lost 15¢ to $106.68/bbl. Gas oil for June gained $2.75 to $911/tonne.

The average price for OPEC’s basket of 12 benchmark crudes was up 12¢ to $105.13/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Senate passes Defense bill with BLM drilling permit program provision

12/15/2014 The US Senate approved a Department of Defense appropriations bill on Dec. 13 containing a provision extending and making permanent a drilling perm...

Cook to head DONG Energy E&P group

12/15/2014 David B. Cook has been named group executive vice-president and chief executive officer for exploration and production at DONG Energy, Fredericia, ...

Sunshine Oilsands appoints chief executive officer

12/15/2014

Sunshine Oilsands Ltd., Calgary, has appointed Luo Hong as chief executive officer and Jiang Qi as president and chief operating officer.

Woodside to buy Apache’s interests in Wheatstone, Kitimat LNG for $2.75 billion

12/15/2014 Woodside Petroleum Ltd. has agreed to acquire interest in the Wheatstone LNG and Kitimat LNG projects, respectively in Western Australia and Britis...

MARKET WATCH: OPEC basket price closes below $59/bbl

12/15/2014 The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while cru...

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...

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