Sam Fletcher
Senior Writer
HOUSTON, Jan. 16 -- Crude prices fell in early trading Jan. 16, giving back much of the gains from Jan. 12, as the New York Mercantile Exchange resumed operations after a 3-day weekend holiday commemorating civil rights leader Martin Luther King Jr.
The renewed market weakness "appears to be driven by comments made by Saudi Arabia's oil minister, Ali Al-Naimi, discounting the recent speculation" of an emergency meeting of ministers of the Organization of Petroleum Exporting Countries to halt the recent drop in crude prices, by OPEC, said analysts in the Houston office of Raymond James & Associates Inc. "With over 60% of OPEC's first 1.2 million b/d cut having been enacted, Al-Naimi seems content to await the results from the cartel's additional 500,000 b/d cut beginning Feb. 1," they said.
Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said Jan. 15 that crude prices are too low but that OPEC officials haven't decided whether to call an emergency meeting to address that problem prior to their next scheduled session Mar. 15. On the other hand, Venezuela's oil minister has called for an emergency meeting to address an oversupply of 700,000-1 million b/d of crude now on the market.
"The past 2 weeks have seen one of the sharpest percentage slides in oil prices since the current up cycle began. However, we also believe that the current weakness is fundamentally unjustified, especially because OPEC has clearly signaled its willingness to defend a price floor near $60/bbl," Raymond James analysts said.
A sharp rebound in natural gas prices last week helped support the value of E&P stocks, said Robert S. Morris, Banc of America Securities LLC, New York. He noted "the onset of more seasonal temperatures and forecasts calling for seasonal to colder-than-normal weather during the second half of January, which typically represents the coldest 2 weeks of winter."
However, Morris said, "Oil prices took the opposite course in dropping to a 19-month low during the week after a bearish US crude plus product inventory report wherein both gasoline and distillate inventories rose much more than anticipated, overshadowing a larger-than-projected drop in crude stocks due mostly to a drop in imports."
The only price report immediately available for Jan. 15 markets was OPEC's basket of 11 benchmark crudes; it gained 58¢ to $49.23/bbl.
Contact Sam Fletcher at [email protected].
