Light, sweet crude oil prices dropped nearly $2 on the New York market Jan. 21, settling at $26.55/bbl for February delivery and hitting a low last seen in 2003. Analysts said oil prices slumped along with declining stock market indexes worldwide, which they attributed to a slowing economy in China.
Energy Security Analysis Inc. (ESAI) on Jan. 20 released a study saying Chinese oil-demand growth during 2015-30 will be 56% lower than the pace of growth during 2000-15. China is becoming less energy-intensive, said Megan Wu, lead Asia analyst at ESAI.
“With demand trends like this, the supply side has to respond,” and cut oil production, she told the Wall Street Journal.
US natural gas futures prices gained, but Barclays Research analysts reduced the firm’s 2016 gas price forecast to $2.56/MMbtu from a previous forecast of $2.84/MMbtu, which assumed normal weather. Temperatures across the US have been higher than normal so far this winter.
“The warm winter is likely to result in storage inventories ending the winter at 2.1 tcf, 35% above the 5-year average,” said Nicholas Potter of Barclays in New York. “The market will probably read this number as bearish and use it to drive prices lower, with prices likely bottoming in April.”
But he expects more support for US gas prices during the second half. Barclays expects 2016 to be a strong year for incremental gas demand although it lowered its LNG demand and industrial gas demand outlooks.
The US Energy Information Administration estimated commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased 4 million bbl for the week ended Jan. 15 compared with the previous week.
The latest total was 486.5 million bbl, according to the weekly Petroleum Status Report, which was released a day later than normal because of the Martin Luther King Jr. holiday on Jan. 18 in the US.
The American Petroleum Institute on Jan. 20 said US oil inventories rose more than analysts expected. API estimated crude inventories increased 4.6 million bbl for the week ended Jan. 15 to 485.2 million bbl.
Analysts surveyed by WSJ in advance of the report had anticipated an increase of 2.3 million bbl.
Gasoline inventories climb
EIA said total motor gasoline inventories increased 4.6 million bbl, which was above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased for the week ended Jan. 15.
Distillate fuel inventories decreased 1 million bbl, and EIA called that level near the upper limit of the average range for this time of year. Propane-propylene inventories fell 1.9 million bbl, but EIA said the level was well above the upper limit of the average range.
US refinery inputs averaged 16.2 million b/d for the week ended Jan. 15, which was 233,000 b/d less than the previous week’s average. Refineries operated at 90.6% of capacity last week.
Gasoline production increased last week, averaging 9.5 million b/d. Distillate fuel production, meanwhile, decreased to 4.6 million b/d.
US crude oil imports averaged 7.8 million b/d, down 409,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged more than 7.8 million b/d, which was 9.6% above the same 4-week period last year.
Total motor gasoline imports, including both finished gasoline and gasoline-blending components, last week averaged 512,000 b/d, and distillate fuel imports averaged 185,000 b/d.
Energy prices
The February crude oil contract on the New York Mercantile Exchange plunged $1.91 to settle at $26.55/bbl on Feb. 20. The March contract was down $1.22 to settle at $28.35/bbl.
The NYMEX natural gas contract for February gained 2.7¢ to a rounded $2.12/MMbtu. The Henry Hub gas price was $2.14/MMbtu on Jan. 20, down 8¢.
Heating oil for February delivery dropped 4.3¢ to a rounded 87¢/gal. The price for reformulated gasoline stock for oxygenates blending for February was down 85¢ to a rounded $1.02/gal.
The March ICE contract for Brent crude dropped 88¢ to settle at $27.88/bbl on Jan. 20, and the April contract was down 85¢ to $28.62/bbl. The ICE gas oil contract was $247.25/tonne on Jan. 20, down $31.50.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for Jan. 20 was $22.48/bbl, down $1.37.
Contact Paula Dittrick at [email protected].