MARKET WATCH: Crude prices fall in ‘worst day of the year’

Oil prices fell Feb. 4 with the front-month crude contract dropping 1.6% in the New York futures market after rising 10% since early December. It was the “worst day of the year” for that market, said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

The fall came after Iran agreed to resume negotiations with the US and other countries on its nuclear program, instantly easing the geopolitical tension premium in crude prices, some analysts said. Iran hasn’t met US, UK, China, France, Russia, and Germany representatives on this issue since June. Western leaders and analysts suppose world trade sanctions against Iran are forcing the country’s leaders back to the conference table. An oil embargo has stopped about half of Iran’s crude exports, and its currency recently fell to a record low against the US dollar.

“It appeared as if the US would take a more conciliatory tone in the upcoming negotiations with Iran,” Ground said. “This morning, it is largely dollar movements that are driving the [oil market], with a weaker dollar providing some lift.”

The decline in oil prices also was assisted “by the weaker-than-expected 1.8% month-to-month growth in US factory orders during December (consensus: 2.3%,) together with the downward revision (minus 0.3% month-to-month) of the November number,” he said. “Besides these proximate causes for the downward pressure, given the heady start to the year we do feel that some correction to oil prices is warranted given global market fundamentals and continue to believe that prices will move lower as we move further into the quarter.”

In Houston, analysts with Raymond James & Associates Inc. said, “Broader markets exhibited some acrophobia for the first time this year as troubles in the Euro-zone prompted a (rational) fear of heights. With stocks sitting at 5-year highs, investors seized the opportunity to take profits from the recent market rally, sending the Standard & Poor’s 500 Index down 1.2%, its biggest fall year-to-date.” Corporate energy stocks followed the broader market with the Oil Service Index down 1% and the SIG Oil Exploration & Production Index declining 1.5%.

However, analysts with the PIRA Energy Group in New York said bullish factors will push oil prices higher as continued low US refinery runs support product stock draws and crude stock builds. “Total US commercial stocks built the week ending Jan. 25, as a crude stock increase more than offset a product inventory decline. The year-on-year stock excess narrowed as last year saw a larger overall inventory increase in this week,” they said. “For the week ending Jan. 26, Japanese crude runs declined and crude stocks were modestly higher. Gasoline and gas oil demands were stronger and allowed for minor stocks draws in both products. Kerosene demand eased, with the stock draw rate continuing to run at recent levels.”

They noted the propane inventory report for the week ended Jan. 25 “showed the highest draw for the US heating season to date and was more than double the decline that was recorded for the reference period last year. Frigid weather boosted overall demand to well above 2012’s level. While stocks have drawn over the last 4 weeks, inventory is comparatively high for this time of the year. Propane has been the more economic US petrochemical feedstock for most of January. It is also an economic alternative to naphtha in Europe.”

In other news, LNG Canada, a joint venture comprised of Shell Canada Ltd., Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd., received approval from Canada's National Energy Board to export LNG from British Columbia. “This becomes just the second major LNG export project to receive approval in Canada, after the Kitimat consortium of Chevron Corp. and Apache Corp.,” said Raymond James analysts. “The only fully permitted US project is Cheniere Energy's Sabine Pass project in Louisiana. LNG Canada plans to export up to 3.2 bcfd to Asia, with tentative plans calling for a final investment decision by mid-decade and startup around 2020. In addition to the three permitted projects, there are more than two dozen other projects at some stage of development in the US and Canada, totaling over 35 bcfd, though we anticipate that only a small fraction of those will ever get built—a function of permitting hurdles as well as financing constraints.”

Energy prices

The March contract for benchmark US sweet, light crudes fell $1.60 to $96.17/bbl Feb. 4 on the New York Mercantile Exchange. The April contract dropped $1.58 to $96.66/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.60 to match the front-month futures closing of $96.17/bbl.

Heating oil for March delivery slipped 0.66¢ to $3.15/gal on NYMEX. Reformulated stock for oxygenate blending for the same month lost 4.21¢ to $3.01/gal.

The March natural gas contract increased 1.4¢ to $3.32/bbl on NYMEX. On the US spot market, gas at Henry Hub, La., fell 5.3¢ to $3.29/MMbtu.

In London, the March IPE contract for North Sea Brent declined $1.16 to $115.60/bbl. Gas oil for February retreated $1.75 to $1,004/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes, however, gained 37¢ to $112.99/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

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

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

Available Webcasts



The Future of US Refining

When 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

When 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



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


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