The contract for US light, sweet crude oil for April delivery plunged by more than $2.80/bbl on the New York market Feb. 26 as volatility sent crude prices on a steep decline toward their lowest level in nearly a month.
Oil prices have closed higher or lower by more than 2% for 24 out of 37 trading days this year compared with 3 days during the same period last year, the Wall Street Journal reported.
Barclays Capital’s Blue Drum note on Feb. 27 said most of the key factors that supported an oil price rally early this year “are likely to prove temporary.”
“Over the next few months, the boost to oil demand from cold weather in North America will fade, unusually high refinery utilization will ease back, and investor enthusiasm for oil is likely to wane,” Barclays analysts said.
“False positives” are behind recent oil price swings, said Barclays analysts, adding they have “no fundamental change of view” from their supply-demand forecasts made in January.
“The necessary great rebalancing of the oil market is still months away, and we think that the oil price is likely to test its mid-January lows again soon,” Barclays said. “Surpluses in the US are building even more rapidly than expected, and we now also expect West Texas Intermediate to be weaker to Brent than we previously forecast.”
Barclays analysts said one of the biggest uncertainties is the speed at which US tight oil producers will reduce production to adjust to lower prices.
“We still believe prices need to move lower again before they rise,” Barclays said. “We have seen little in any of the incoming data to suggest US supply growth is slowing sharply enough to prevent another fall in prices.”
Energy prices
The New York Mercantile Exchange April crude oil contract was down $2.82 to $48.17/bbl Feb. 26 while the May contract declined $2.37 to $50.39/bbl.
The natural gas contract for April dropped 16.5¢ to a rounded $2.70/MMbtu. The Henry Hub, La., gas price was $3.18/MMbtu, down 8¢.
Heating oil for March rose 3.2¢ to a rounded $2.14/gal. Reformulated gasoline stock for oxygenate blending for March delivery fell 1¢ to a rounded $1.71/gal.
The April ICE contract for Brent crude oil dipped $1.58, settling at $60.05/bbl. The May contract was down $1.64 to $60.71/bbl. The ICE gas oil contract for March gained $6 to $585.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Feb. 26 was $56.07/bbl, up $2.26.
Contact Paula Dittrick at [email protected].
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.
