MARKET WATCH: NYMEX crude prices drop on higher rig count ahead of production data

Feb. 7, 2017
Light, sweet crude oil prices dropped more than 80¢/bbl on the New York market Feb. 6 as market participants adjusted to a rising US rig count and its possible consequences on production cuts being made by other major producers in efforts to drain massive oil inventories worldwide.

Light, sweet crude oil prices dropped more than 80¢/bbl on the New York market Feb. 6 as market participants adjusted to a rising US rig count and its possible consequences on production cuts being made by other major producers in efforts to drain massive oil inventories worldwide.

Analysts said a strengthening US dollar also put a damper on oil prices. The Wall Street Journal Dollar Index, which tracks the dollar against other currencies, rose 0.59% to 90.94 as of early Feb. 7. Oil is traded in US dollars, meaning a stronger dollar makes oil more expensive for buyers using other currencies.

Traders said oil prices fell on a climbing US rig count. Baker Hughes Inc. reported that working rotary rigs for the week ended Feb. 3 climbed 17 units to 729. Units targeting crude oil and units drilling horizontally were up 17 units each during the week ended Feb. 3 (OGJ Online, Feb. 3, 2017).

The Energy Information Administration was scheduled Feb. 8 to release weekly US oil and products inventory estimates.

EIA has reported crude inventories gains for four consecutive weeks. Rising production and climbing rig counts are making investors worry that US production could offset production cuts by the Organization of Petroleum Exporting Countries and other major producers.

Those cuts started in January in efforts to support oil prices. Analysts believe OPEC members largely are complying with vows to cut production by a total of 1.2 million b/d in efforts to reduce abundant world crude inventories. OPEC’s January production statistics will be released Feb. 13.

Energy prices

The NYMEX crude oil contract for March delivery dropped 82¢ on Feb. 6 to $53.01/bbl. The April contract was down 84¢ to $53.63/bbl.

US natural gas futures for March delivery dropped 1¢ to a rounded $3.05/MMbtu. Gas spot prices at the Henry Hub in Cushing, Okla., dropped 8¢ to $2.92/MMbtu.

Heating oil for March fell nearly 3¢ to a rounded $1.63/gal. Reformulated gasoline stock for oxygenate blending for March dropped 4¢ to a rounded $1.51/gal.

The Brent crude contract for April on London’s ICE fell $1.09 to $55.72/bbl. The Brent May contract was down $1.05 to $56.10/bbl. Gas oil for February closed at $494.50/tonne, down $2.50.

The average price for OPEC’s basket of benchmark crudes on Feb. 6 was $53.77/bbl, down 47¢.

Contact Paula Dittrick at [email protected].