MARKET WATCH: November crude drops $2/bbl

Oct. 9, 2007
In the biggest 1-day decline since mid-August, front-month benchmark crude dropped more than $2/bbl Oct. 8 to the lowest closing on the New York market since Sept. 11.

Sam Fletcher
Senior Writer

HOUSTON, Oct. 9 -- In the biggest 1-day decline since mid-August, front-month benchmark crude dropped more than $2/bbl Oct. 8 to the lowest closing on the New York market since Sept. 11 as the US dollar inched up 0.7% against the euro.

"A rebounding dollar index and trading desks half empty for Columbus Day [a US holiday] left most of the commodity spectrum in the red," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

Moreover, Jakob said: "We had yesterday a series of warning signals on the supply side: Iraq continues to pump Kirkuk [crude] to the Mediterranean and is able to align one export tender after the other; Royal Dutch Shell PLC is starting to lift the force majeure on [crude loadings from the] Forcados [terminal] in Nigeria; and the pipe connections to the Atlantis [oil] field in the US Gulf of Mexico have been completed for a confirmed start before the end of the year. Because of strife in Iraq and Nigeria and project delays in the US gulf, these volumes had been mostly discounted by the market and not fully factored in the world supply and demand. These additional supply barrels that are all coming into the Atlantic Basin will have now to start pricing themselves and will put a stronger cap on any attempt to retest previous highs."

Oil prices were down slightly in premarket trading Oct. 9 amid speculation that the US Department of Energy will report crude inventories rose last week while refineries were down for maintenance. That weekly report won't be released until Oct. 11 because of the Columbus holiday.

Energy prices
The November contract for benchmark sweet, light crudes bounced between $78.35-81.11/bbl Oct. 8 on the New York Mercantile Exchange before closing at $79.02/bbl, down $2.20 for the day. The December contract dropped $2.22 to $78.40/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $2.20 to $79.03/bbl. Heating oil for November delivery fell 6.39¢ to $2.16/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) retreated by 4.91¢ to $2/gal.

The November natural gas contract fell 22.7¢ to $6.85/MMbtu on NYMEX "due to profit-taking and the lack of any pending storm threats," said analysts in the Houston office of Raymond James & Associates Inc. On the US spot market, gas at Henry Hub, La., was down 9.5¢ to $6.75/MMbtu.

In London, the November IPE contract for North Sea Brent crude dropped $2.32 to $76.58/bbl. October gas oil fell $15.75 to $676/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes lost 86¢ to $75.37/bbl on Oct. 8.

Contact Sam Fletcher at [email protected].