Crude oil benchmarks rose modestly on the New York and London markets Jan. 31 as traders awaited the US government weekly oil and products inventory report. Asian trading was quiet because of the Lunar New Year holiday. Oil futures in New York have hovered in a $50-$55/bbl range since December.
“Oil prices have settled into a remarkably narrow range this year, with spot Brent fluctuating less than $5/bbl,” Citi analysts said. Noting oil prices are holding fairly steady, Citi analysts said, “a multitude of factors could see oil-price volatility return.”
Analysts surveyed by The Wall Street Journal expected US oil inventories to have increased 2.9 million bbl for the week ended Jan. 27. Separately, the American Petroleum Institute estimated supplies rose by 5.8 million bbl.
Fitch Ratings of New York issued a report saying Venezuela’s Petroleos de Venezuela SA is likely to default this year because it faces weak liquidity and high debt payments coming due. In case of a default, PDVSA bonds face an average recovery rate of 31-50% of their value, the report said.
Actual recovery could be at the low end of that range because Venezuelan government probably would extend concessions to investors. PDVSA’s debt as of December 2016 was $41 billion.
"Should oil prices remain around current levels, average recovery may lead to additional future defaults to further reduce obligations and allow for necessary transfers to the government," said Lucas Aristizabal, Fitch senior director.
The Organization of Petroleum Exporting Countries and other major producers have vowed to reduce production by about 1.8 million b/d with OPEC accounting for 1.2 million b/d of those cuts. Meanwhile, US rig counts and oil production are rising.
“Oil will remain top-of-mind as OPEC output reductions are monitored and the market finally gets a taste of how quickly the US shale patch can put rigs and workers back to work,” said Rory Johnston, Scotiabank commodity economist. “We anticipate OPEC compliance of roughly 75%,
Scotiabank forecast light, sweet crude futures prices will average $58/bbl in 2017 and $61/bbl in 2018.
Energy prices
The New York Mercantile Exchange crude oil contract for March delivery increased 18¢ on Feb. 1 to $52.81/bbl. The April contract was up 18¢ to $53.42.
US natural gas futures for March delivery fell a rounded 11¢ to a rounded $3.12/MMbtu. Gas spot prices at the Henry Hub in Cushing, Okla., were unavailable.
Heating oil for February edged up less than a penny to remain at a rounded $1.61/gal. Reformulated gasoline stock for oxygenate blending for February gained 2¢ to a rounded $1.53/gal.
The Brent crude contract for March on London’s ICE increased 47¢ to $55.70/bbl. The Brent April contract was up 26¢ to $55.58. Gas oil for February closed Feb. 1 at $493.75/tonne, up $9.
The average price for OPEC’s basket of benchmark crudes on Feb. 1 was $52.19/bbl, down 59¢.
Contact Paula Dittrick at [email protected].
