US light, sweet crude oil futures prices for February rebounded modestly on the New York market Jan. 7 after a weekly government report showed crude oil inventories dropped more than analysts had expected while supplies of diesel and gasoline gained.
The Energy Information Administration reported US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.1 million bbl for the week ended Jan. 2 from the previous week (OGJ Online, Jan. 7, 2015).
Analysts said global oil market fundamentals remain weak, and more price volatility is expected in coming weeks.
On Jan. 7, the Federal Reserve Open Market Committee released its minutes from the Dec. 16-17 meeting, which indicated the Feds believe an interest rate hike is unlikely before late April.
Falling oil prices were mentioned 19 times in the latest minutes compared with 4 times in the minutes from October. Fed officials suggested declining oil prices could exacerbate deflationary pressures overseas—which could hinder the buying power of some US trading partners.
Meanwhile, the euro fell to a 9-year low against the dollar Jan. 7, which analysts said puts pressure on the European Central Bank to take action.
US natural gas prices have been volatile in recent weeks, and gas prices on the futures market remained depressed during the week ended Jan. 2, which analysts attributed in part to a strong injection season.
The EIA estimated gas in underground storage across the lower 48 as of Jan. 2 was a rounded 3.09 tcf. That marked a net decline of 131 bcf from the previous week.
Gas storage levels were 250 bcf higher than last year at this time and 67 bcf below the 5-year average of a rounded 3.16 tcf, EIA said in its weekly gas storage report released Jan. 8.
As of late 2014, gas production levels had risen to record highs, according to production data from Bentek Energy LLC. Dry natural gas production averaged 70.8 bcfd during Nov. 1-Dec. 17, marking an increase of 4.8 bcfd over that same period in 2013.
EIA forecasts gas storage inventories at the end of March will be 1.43 tcf, significantly higher than the 2014 end-of-March inventories, which were at an 11-year low of 857 bcf. However, even if the rest of the winter matches last winter in severity, it is unlikely that storage inventories would drop as low as they did at the end of last winter because of the gains in production, EIA said in a Dec. 17 natural gas weekly update. Gains in gas production stem largely from unconventional plays.
Energy prices
The NYMEX February crude oil contract rose 72¢ on Jan. 7, closing at $48.65/bbl. The March contract gained 62¢ to $49.08/bbl.
The natural gas contract for February declined 6.7¢ to a rounded $2.87/MMbtu. The cash gas price at Henry Hub, La., rose 11¢ to $3.07/MMbtu on Jan. 7.
Heating oil for February delivery was down 2.6¢ to a rounded $1.70/gal. Reformulated gasoline stock for oxygenate blending for February declined by a rounded 1.7¢ to a rounded $1.34/gal.
The February ICE contract for Brent crude oil edged up 5¢ to $51.15/bbl. The March contract also gained 4¢ to $52.17/bbl. The ICE gas oil contract for January dropped $10 to $477.50/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Jan. 7 was $44.85, down $1.77 from the previous day.
Contact Paula Dittrick at [email protected].
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.
