MARKET WATCH: Crude oil prices fall on economic indicators, Libyan news

Crude oil prices dropped on New York and London markets in Feb. 3 trading, and analysts said traders focused on weaker-than-expected US and Chinese economic indicators along with the possibility of Libya boosting its oil exports toward more normal levels.

US crude prices declined on Feb. 3 after the Institute for Supply Management reported its January manufacturing purchasing managers index was 51.3. That compared with a forecast of 56 and was a decline from December’s 56.5.

The China Manufacturing Purchasing Managers’ Index dropped to a 6-month low, falling to 50.5 in January from 51 in December.

Brent crude oil prices also dropped slightly upon reports that Libyan Prime Minister Ali Zeidan has ordered the army to end an oil blockade in Eastern Libya. Labor disputes throughout most of 2013 cut Libya’s production and exports. Consequently, reduced oil volumes from Libya supported Brent prices.

In its weekly oil recap for the week ended Feb. 2, PIRA Energy Group of New York said world inventories of crude oil and products are supportive of oil prices along with positive signs from emerging markets.

“Significant momentum in major developed economies should provide a lift for emerging markets, eventually easing financial market pressure,” PIRA said. “Low inventories are currently supportive for oil prices. Diesel cracks stay strong for 2 to 3 more weeks before seasonally weakening, while gasoline cracks will benefit from a substantial refinery maintenance program.”

Analysts suggest “political risks were balanced in January, and PIRA assumes disruptions remain high, but will decline in 2014 although it is by no means a sure bet.”

Energy prices

The New York Mercantile Exchange March crude contract declined $1.06 on Feb. 3 to close at $96.43/bbl, which was the front-month’s lowest settlement in a week. The April contract dropped 99¢ to settle at $95.72/bbl.

Heating oil for March delivery increased 1.04¢ to a rounded $3.01/gal upon tightening supplies as winter storms hit the US Northeast. Reformulated gasoline stock for oxygenate blending for March delivery fell 2.45¢ to a rounded $2.61/gal.

The March natural gas contract on NYMEX declined 3.8¢ to a rounded $4.91/MMbtu. On the US spot market, the gas price at Henry Hub climbed by 7¢, closing at a rounded $5.07/MMbtu.

In London, the March ICE contract for Brent crude delivery was down 36¢, closing at $106.04/bbl, which was the lowest front-month settlement since Nov. 12, 2013. The April Brent contract dropped 42¢ to $105.39/bbl. The ICE gas oil contract for February was down $14 to $903/tonne.

The Organizational of Petroleum Exporting Countries reported its basket of 12 benchmark crudes was $102.55/bbl on Feb. 3, marking a $1.90 drop from Jan. 31.

Contact Paula Dittrick at paulad@ogjonline.com.

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