US light, sweet crude oil dropped moderately on the New York market Oct. 7 but still settled just below $50/bbl for November delivery while the December contract remained above $50/bbl. The Brent contract for December on the London market settled at just under $52/bbl on Oct. 7.
Hans van Cleef of ABN AMRO said he sees “quite a few traps and pitfalls ahead” of the Organization of Petroleum Exporting Countries regarding a proposed production cut decision at its Nov. 30 meeting in Vienna.
Specific details on the proposed production quota changes have yet to be worked out.
“OPEC has previously hinted several times at the possibility of lowering its production ceiling or freezing production growth,” van Cleff said. “Until now, however, these noises never got beyond the stage of verbal intervention, possibly because the market reaction based on these announcements was sufficient to refrain from concrete action. This has made the market suspicious and raises justifiable doubts as to why OPEC, unlike before, would now be able to reach a consensus agreement and take concrete action.”
In addition, certain OPEC countries are seeking exceptions, which could lead to more uncertainties, he said.
“Oil production in both Libya and Nigeria is plagued by sabotage and unrest. So both these countries have upward production potential and could ramp up output as soon as their problems are solved,” van Cleef said.
Increased production from Libya and Nigeria could “impose extra output constraints on the other OPEC countries to achieve the promised production ceiling. Whether the other members are prepared to make this financial sacrifice is highly debatable,” he said.
Iran also has said it is seeking to increase production to regain market share since the lifting of international sanctions.
Energy prices
The November crude oil contract on the New York Mercantile Exchange declined 63¢ on Oct. 7 to close at $49.81/bbl. The December contract was down 60¢ to $50.38/bbl.
The natural gas contract for November rose 14¢ to a rounded $3.19/MMbtu. On the spot market, the Henry Hub gas price dropped 3¢ to $2.96/MMbtu.
Heating oil for November fell 1.7¢ to a rounded $1.58/gal. The price for reformulated gasoline stock for oxygenates blending for November fell 1.6¢ to a rounded $1.48/gal.
The December Brent crude contract on London’s ICE decreased 58¢ to settle at $51.93/bbl, and the January contract fell 57¢ to settle at $52.24/bbl. The October gas oil contract settled at $467.25/tonne, down $1.25.
The average price for OPEC’s basket of benchmark crudes on Oct.7 was $48.58/bbl, up 74¢.
Contact Paula Dittrick at [email protected].
