Oil prices rebounded by nearly $3 on the New York market Dec. 1 to settle at $69/bbl after plunging more than $7/bbl in a single trading session last week in reaction to a decision by members of the Organization of Petroleum Exporting Countries to keep their current production quota.
But oil prices dropped again in early Dec. 2 trading. Deutsche Bank strategist Michael Hsueh said ample world oil supplies likely will persist into the first half of next year.
If oil prices under $70/bbl were to continue, it would take months before US unconventional oil production levels could be reduced and before a change in oil supply would be reflected in US light, sweet oil futures prices, he said.
“We estimate that sustained pricing at $60/bbl WTI is the level which would trigger a material shift in the trajectory of US production growth,” Hsueh said in a Deutsche Bank report.
Elsewhere, China’s official manufacturing purchasing managers’ index fell to 50.3 in November compared with 50.8 in October. The November index marked an 8-month low. Some economists suggest slowing Chinese manufacturing activity contributes to sluggish world oil demand.
A third-party China index also dropped. The HSBC PMI dropped to 50, which is considered the division between growth and contraction.
Energy prices
The New York Mercantile Exchange January crude oil contract rose $2.85 on Dec. 1, closing at $69/bbl. The February contract gained $2.84 to $69.10/bbl.
The natural gas contract for January dropped 8¢ to a rounded $4.01/MMbtu. The cash gas price at Henry Hub, La., was $3.90/MMbtu on Dec. 1. The previous closing price was unavailable.
Heating oil for January delivery gained 5¢ to a rounded $2.21/gal. Reformulated gasoline stock for oxygenate blending for January also rose 5¢ to a rounded $1.88/gal.
The January 2015 ICE contract for Brent crude oil gained $2.39 to $72.54/bbl. The February contract climbed $2.36 to $72.94/bbl. The ICE gas oil contract for December dropped $10, settling at $646.75/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Dec. 1 was $66.44/bbl, down $2.45.
Contact Paula Dittrick at [email protected].
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.
