Light, sweet crude prices for February delivery plunged on the New York market Jan. 11 settling down $1.75 to $31.41/bbl—the lowest level since December 2003.
The Brent price for February delivery settled on the London market down $2 to $31.55/bbl—the lowest level since April 2004.
“We are fast approaching $30/bbl on both benchmarks and if we did go lower, we would be in critical territory,” said Ole Hansen, Saxo Bank head of commodity strategy. He sees producers hedging activity as favoring additional weakening in prices.
Hansen anticipated a rise in the weekly government report on US oil and product supplies, which comes out Jan. 13.
“Burning oil tanks in Libya and tensions between Iran and Saudi Arabia have failed to support the market as the focus has diverged back to the global overhang of supply,” Hansen said.
Morgan Stanley analysts said five previous major oil price downturns since 1970 no longer can be a credible guide for what to expect, saying the oil market has entered “uncharted territory.”
Morgan Stanley analysts wrote, “No floor in oil prices has been found so far,” adding that crude oil prices show no sign of recovering in the first half.
Analysts and traders in general are worried about ample world oil supplies and possible slowing oil demand from China. The world crude oil market is expected to become more oversupplied because sanctions are expected to be lifted on Iran, allowing the country to increase its oil exports as early as next month.
US production has fallen in recent months, but the decline was slower than many anticipated as unconventional producers became more efficient, and some decreases in shale-oil production were offset by increasing offshore production from the Gulf of Mexico.
In the Drilling Productivity Report, the US Energy Information Administration said it expects oil production from seven US unconventional regions will fall by 116,000 b/d in February from January, which would be the biggest monthly decline since January 2015.
Natural gas production from those same regions was expected to fall by 405 MMcfd in February from January, EIA forecast.
Energy prices
The March contract was down $1.80 to settle at $32.52/bbl.
The NYMEX gas contract for February declined 7¢ to a rounded $2.40/MMbtu. The Henry Hub gas price rose 6¢ to $2.53/MMbtu on Jan. 11.
Heating oil for February delivery dropped 3.7¢ to a rounded $1.01/gal. The price for reformulated gasoline stock for oxygenates blending for February was down 1.5¢ to a rounded $1.11/gal.
The March ICE contract for Brent crude was down $2.05 to $31.88/bbl. The ICE gas oil contract was $299.25/tonne on Jan. 11, up $2.50.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for Jan. 11 was $27.07/bbl, down $1.39.
Contact Paula Dittrick at [email protected].
