Light, sweet crude oil prices for May delivery slipped to close below $65/bbl on the New York market Mar. 28 after the US Energy Information Administration reported US oil inventories increased by 1.6 million bbl for the week ended Mar. 23.
The latest estimated oil inventory total was 429.9 million bbl while gasoline inventories decreased by 3.5 million bbl (OGJ Online, Mar. 28, 2018).
Ole Hansen, Saxo Bank head of commodity strategy, said, “From a seasonal perspective, rising crude oil stocks and falling product stocks are what can be expected at this time of year when refinery maintenance reduces demand for oil and the production of products.”
EIA’s Petroleum Status Report said US oil production rose 26,000 b/d to 10.433 million b/d for the week ended Mar. 23. Production across the Lower 48 reached 9.917 million b/d, accounting for 25,000 b/d of that weekly production increase.
Oil prices also dropped Mar. 28 in London to close below $70/bbl. The Brent contract for May had briefly reached slightly above $71/bbl on Mar. 26, the front-month’s highest since Jan. 25. Although the price had dropped somewhat by closing on Mar. 26, it still held above $70/bbl.
Analysts attributed Brent’s recent price peak to growing concerns about US President Donald Trump’s dislike of the 2015 international agreement to curb Iran’s nuclear program. The US could drop out of the agreement and reinstate US economic sanctions on the Islamic republic.
Meanwhile, market participants are closely watching the Organization of Petroleum Exporting Countries for hints of future decisions regarding oil-production cuts.
Some OPEC and non-OPEC delegates met in a private meeting in Vienna earlier this month and discussed whether to continue measuring oil inventories in developed economies against a 5-year average.
The major producers reached no decision in discussions about steps they might take in efforts to reduce oil inventories held by members of the Organization of Economic Cooperation and Development, Bloomberg reported.
One option is to use a 7-year inventory average. A 7-year average measurement likely would require a longer period of production-cut targets to achieve than using a 5-year average.
The cartel has cut its output by 1.8 million b/d since January 2017 to help support oil prices. Currently, some OPEC members reportedly disagree on a price target. Saudi Arabia suggests $70/bbl or higher. Iran suggests $60/bbl. Venezuela’s dropping oil production has boosted OPEC’s compliance with its production-cut targets.
“The involuntary production outages in Venezuela are weighing…heavily, as they mean that OPEC is reducing its output by considerably more than originally intended,” Commerzbank analysts said in a research note.
Energy prices
The May light, sweet crude contract on the NYMEX fell 87¢ on Mar. 28 to settle at $64.38/bbl. The June contract declined 83¢ to $64.35/bbl.
The NYMEX natural gas price for May declined 1.6¢ to a rounded $2.70/MMbtu. The Henry Hub cash gas price rose 4¢ to $2.64/MMbtu on Mar. 28.
Ultralow-sulfur diesel for April decreased less than 1¢ to a rounded $2.01/gal. The NYMEX reformulated gasoline blendstock for April also declined less than a penny to remain at $2.01/gal.
Brent crude oil for May fell 58¢ to $69.53/bbl on London’s International Commodity Exchange. The June contract fell 70¢ to $68.76/bbl. The gas oil contract for April was $616/tonne, down $2.
OPEC’s basket of crudes was $66.05/bbl on Mar. 28, down 75¢. The OPEC Secretariat office will be closed Mar. 30 and Apr. 2.
Contact Paula Dittrick at [email protected].
