Paula Dittrick
Senior Staff Writer
HOUSTON, Mar. 19 -- US front-month crude oil futures prices dropped modestly on Mar. 16 while traders watched for clues that economic growth, and consequently oil demand, might decline as some economists have suggested. Overall, the market lacked direction after the Organization of Petroleum Exporting Countries announced Mar. 15 that no changes to oil production quotas would be made.
OPEC ministers said last week the market remains well-supplied with crude oil, and that they would continue monitoring market developments (OGJ Online, Mar. 15, 2007).
The Centre for Global Energy Studies issued a monthly oil report Mar. 19 in which analysts said, "OPEC has set the scene for another upward spiral in oil prices over the summer. Having cut output at the start of the winter, OPEC always risked taking too much oil off the market at a time when demand for its exports was strong, and that is exactly what has happened."
Dropping temperatures and slower-than-expected growth in non-OPEC output has depleted stocks and left crude oil in short supply when refiners need to boost throughputs to support a second-quarter build in product stocks, CGES said. OPEC overestimated non-OPEC output growth over the winter and might be doing so for the rest of the year as well, analysts said.
Oil production by the 11 members of OPEC, excluding Angola, has dropped by more than 1.4 million b/d since the recent peak in August 2006, CGES estimates. Angola recently joined OPEC.
"If OPEC does not ease its output restrictions, its annual average production will fall by 0.8 million b/d between 2006 and 2007, including growth in Angola's production. Yet the organization itself sees the call on its oil remaining unchanged between last year and this at 30.4 million b/d, implying a further stock draw in 2007," CGES said.
Energy prices
The April contract for benchmark US sweet, light crudes fell 44¢ to $57.11/bbl Mar. 16 on the New York Mercantile Exchange. The May contract decreased 38¢ to $59.58/bbl.
On the US spot market, West Texas Intermediate was down 45¢ to $57.12/bbl. Heating oil for April delivery held steady at $1.6888/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB) rose by 2.55¢ to $1.9071/gal.
The April natural gas contract declined by 3.5¢ to $6.924/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., dropped by 15¢ to $6.83/MMbtu.
In London, the May IPE contract for North Sea Brent crude decreased by 38¢ to $60.30/bbl. April gas oil gained $8 to $536.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes dropped 47¢ to $56.73/bbl on Mar. 16.
Contact Paula Dittrick at [email protected].
