Crude oil prices fell below $61/bbl for January delivery on the New York market Dec. 10 after the Organization of Petroleum Exporting Countries lowered its 2015 world oil demand growth forecast and after a weekly US government report showed a build in crude oil supplies (OGJ Online, Dec. 10, 2014).
In its latest monthly report, OPEC said the cartel’s oil production fell by 390,100 b/d to 30.05 million b/d in November compared with October. OPEC’s total production for November was just above the cartel’s output quota level of 30 million b/d, which delegates recently maintained during a Nov. 27 meeting.
Analysts largely attributed plunging oil prices on both the New York and London markets to OPEC’s downward revisions. Front-month prices on both markets fell by more than $2/bbl following the OPEC report on Dec. 10.
Regarding natural gas in underground storage across the Lower 48, the Energy Information Administration estimated levels at nearly 3.36 tcf as of Dec. 5, a net declined of 51 bcf from the previous week.
Stocks were 186 bcf less than last year at this time and 351 bcf below the 5-year average of 3.7 tcf, the weekly gas storage report said.
Eric H. Otto, analyst with CLSA Americas LLC, said the recent sharp and sustained drop in oil prices is different from past price down cycles because this downturn initially was supply-led with vulnerabilities related to gross domestic product serving as an additional catalyst to the downside.
“In order to maintain a high price in a weak demand environment, some supply needs to be taken off the market,” Otto wrote in a research note, adding that any supplier who reduces production will lose market share and consequently earning ability.
“There is a strong incentive for each player to resist being the first to cut production and wait for weaker peers to lead the way.”
Energy prices
The New York Mercantile Exchange January crude oil contract fell $2.88 on Dec. 10, closing at $60.94/bbl. The February contract dropped $2.82 to $61.16/bbl.
The natural gas contract for January settled up 5.4¢ to a rounded $3.71/MMbtu. The cash gas price at Henry Hub, La., was $3.61 on Dec. 10, up 1¢.
Heating oil for January delivery fell a rounded 3.8¢ to a rounded $2.05/gal. Reformulated gasoline stock for oxygenate blending for January was down 8¢ to a rounded $1.64/gal.
The January 2015 ICE contract for Brent crude oil fell $2.50 to $64.24/bbl. The February contract dropped $2.66 to $64.56/bbl. The ICE gas oil contract for December plummeted $22.25, settling at $581.75/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Dec. 11 was $61.35/bbl, down 98¢.
Contact Paula Dittrick at [email protected].
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.
