MARKET WATCH: NYMEX crude oil prices holding under $50/bbl

March 3, 2015
The contract for US light, sweet crude oil for April delivery declined modestly on the New York market Mar. 2 holding under $50/bbl while Brent crude oil prices on the London market fell by more than $3 to close at under $60/bbl.

The contract for US light, sweet crude oil for April delivery declined modestly on the New York market Mar. 2 holding under $50/bbl while Brent crude oil prices on the London market fell by more than $3 to close at under $60/bbl.

Hans van Cleef of ABN AMRO Group Economics believes it’s too soon to say if oil prices have started to bottom out because worldwide oil oversupply continues. He said it will be the second half of the year before the supply-demand balance begins to change.

“The recovery is partly speculation driven, and partly driven by the expected effects of the low oil prices on both the demand and supply,” van Cleef said in the Energy Monitor March note. “Basically, nothing has changed in the oil fundamentals over the past several weeks. Oversupply is still an issue, and this caps the upside potential of oil prices in this supply-driven market.”

He noted that US crude oil production continues rises up to this point and the total production of the Organization of Petroleum Exporting Countries does not appear to have changed.

“The drop in export and production of Libyan oil has been absorbed by increased oil production in Saudi Arabia and Iraq,” he said.

ABN AMRO has forecast Brent crude oil prices on the London market will average $60/bbl oil in 2015 and $75/bbl oil in 2016. Van Cleef of Amsterdam said $80/bbl would be considered a fair price for oil by both producers and consumers although he does not expect this to be the average price anytime soon.

Analysts with Barclays said oil prices will have to drop more to have a meaningful effect on supply reductions.

“The necessary great rebalancing of the oil market is still months away, and we think that the oil price is likely to test its mid-January lows again soon,” Barclays said in a research note. February ended on a strong note with oil prices on the upswing.

Meanwhile, the HSBC China Manufacturers Purchasing Managers Index rose to a final reading of 50.7 in February from 49.7 in January. China’s central bank cut interest rates (OGJ Online, Mar. 2, 2015).

Energy prices

The New York Mercantile Exchange April crude oil contract was down 17¢ to $49.59/bbl Mar. 2 while the May contract decreased 62¢ to $51.52/bbl.

The natural gas contract for April dropped 3.6¢ to a rounded $2.70/MMbtu. The Henry Hub, La., gas price was $2.84/MMbtu, up 7¢.

Heating oil for April dropped 8.6¢ to a rounded $1.89/gal. Reformulated gasoline stock for oxygenate blending for April delivery was down 8¢ to a rounded $1.90/gal.

The April ICE contract for Brent crude oil plunged $3.04, settling at $59.54/bbl. The May contract dropped $2.96 to $60.19/bbl. The ICE gas oil contract for March declined $9.25 to $584.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Mar. 2 was $59.63/bbl, up $2.80.

Contact Paula Dittrick at [email protected].

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.