Light, sweet crude oil prices plummeted on both the New York and London markets on Mar. 8 following a record increase in US crude oil inventories, excluding the Strategic Petroleum Reserve.
The Energy Information Administration estimated US inventories increased 8.2 million bbl for the week ended Mar. 3 to 528.4 million bbl (OGJ Online, Mar. 9, 2017).
The build in US oil supply comes while the Organization of the Petroleum Exporting Countries is cutting production to stabilize oil prices.
OPEC Sec.-Gen. Mohammed Barkindo said Mar. 7 at a conference in Houston that commitment among countries who plan output cuts “remains high” (OGJ Online, Mar. 8, 2017).
During CERAWeek by IHS Markit, Saudi Minister of Energy Khalid al-Falih said OPEC “will not bear the burden of free riders” when it comes to supporting oil prices. Non-OPEC producers “simply reaped the benefits of OPEC supply reduction,” in the past, he said.
Separately, Ole Hansen, Saxo Bank head of commodity strategy at Saxo Bank, attributed the oil price drop to traders selling out long positions because they currently doubt that oil prices will continue higher.
“The market psychology has changed, with longs now looking to reduce or get out,” Ole said. “They were looking for a bounce to sell into, but as it failed to materialize, they resumed selling. Some short-term buyers looking for a bounce stopped themselves out once it broke below $50.”
Energy prices
The crude oil contract for April delivery on the New York Mercantile Exchange plunged $2.86 on Mar. 8 to $50.28/bbl. The May contract dipped $2.81 to $50.83/bbl.
The natural gas price for April gained nearly 8¢ to a rounded $2.90/MMbtu. The cash gas price at the Henry Hub closed at $2.69/MMbtu, up 11¢.
Heating oil for April fell 6¢ to a rounded $1.56/gal. Reformulated gasoline stock for oxygenate blending for April fell nearly 3¢ to a rounded $1.63/gal.
The Brent crude contract for May on London’s ICE plummeted by $2.18 to $53.11/bbl. The Brent June contract dropped $2.76 to $53.37/bbl. Gas oil closed at $482.50/tonne, down $5.25.
The average price for OPEC’s basket of benchmark crudes on Mar. 9 was $52.69/bbl, down 85¢.
Contact Paula Dittrick at [email protected].
