Sam Fletcher
Senior Writer
HOUSTON, Nov. 1 -- For the first time in 3 months, front-month crude futures prices fell below $60/bbl Oct. 31 on the New York market through a combination of adequate supplies and warmer weather at the official Nov. 1 start of the winter heating season.
The US Minerals Management Service reported 233 offshore platforms—1 fewer than on Oct. 28—and 6 drilling rigs in the Gulf of Mexico were still lacking crews as of Oct. 31. Shut-in crude production still exceeded 1 million b/d, while shut-in natural gas production slipped to 5.4 bcfd. Cumulative production lost from gulf waters since Aug. 26 totaled 74.7 million bbl of crude and 381.1 bcf of natural gas.
Energy prices
The December contract for benchmark US sweet, light crudes dropped $1.46 to $59.76/bbl on the New York Mercantile Exchange. The January contract declined by $1.14 to $60.39/bbl. However, closing prices for subsequent months were sequentially higher, in a pattern called contango, through July. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.46 to $59.77/bbl.
The falloff in crude prices was triggered by a drop in futures prices for petroleum products on NYMEX. Gasoline for November delivery fell by 9.81¢ to $1.53/gal. Heating oil for the same month lost 7.37 to $1.77/gal.
Following a 62.9¢ loss on Oct. 28, the December natural gas contract plunged by 85¢ to $12.21/MMbtu, the lowest level since Hurricane Rita went ashore in Texas on Sept. 24. That downturn continued "as forecasts for mild weather indicated low demand on the traditional November start of the heating season," said analysts at Enerfax Daily.
"Traders spent much of the day trying to push prices below the $12.21/MMbtu level, a 50% retracement of the market's gain from Aug. 26, before Hurricane Katrina struck Louisiana, to its Oct. 5 high. The level is important to traders who follow Fibonacci analysis, which says that prices rise or fall by specific percentages after reaching a high or low," said Enerfax analysts.
Leonardo Fibonacci was a 13th Century mathematician whose work on the relationship of mathematics and nature has been applied in physics, astronomy, and engineering. Some say Fibonacci's principles apply as well to markets and market psychology, with number series and ratios used to create indicators.
In London, the December contract for North Sea Brent crude lost $1.32 to $58.10/bbl on the International Petroleum Exchange. The November gas oil contract fell by $16.50 to $552/tonne.
The Organization of Petroleum Exporting Countries' headquarters in Vienna was closed Nov. 1, so no update on the average price of the group's basket of 11 benchmark crudes was available.
Contact Sam Fletcher at [email protected].
