Market Watch: NYMEX crude oil settles below $47/bbl on oversupply concerns

Dec. 19, 2018
Light, sweet oil prices fell more than $3/bbl on New York market Dec. 18 with the January contract settling at $46.24/bbl, the front-month’s lowest closing since Aug. 30, 2017. 

Light, sweet oil prices fell more than $3/bbl on New York market Dec. 18 with the January contract settling at $46.24/bbl, the front-month’s lowest closing since Aug. 30, 2017. Analysts blamed the steep drop on concerns that oil production is overtaking oil demand growth.

US crude oil future prices have dropped about 40% and Brent crude oil prices on the London market have dropped about 35% since reaching 5-year highs in early October. On Dec. 18, the Brent contract for February delivery dropped more than $3/bbl to settle below $57/bbl.

“These are their lowest levels in roughly 15 months,” Commerzbank analysts wrote in a Dec. 19 research note. “Above-average trading volumes point to selling via the futures market [and] the price falls below previous lows are likely to have triggered further selling by speculators.”

In its Oil Drilling Productivity Report, the US Energy Information Administration on Dec. 17 forecast oil production from seven key US shale regions will rise by nearly 134,000 b/d to 8.166 million b/d in January 2019.

Separately, Reuters reported that its sources said Russia is producing an estimated 11.42 million b/d during December. Russia has agreed to reduce oil production starting in January 2019 although Russian officials have said output will be tapered off gradually.

Goldman Sachs analysts expect that Brent crude oil prices will rebound to average above $70/bbl in 2019. Jeff Currie, Goldman Sachs head of commodities research, spoke with CNBC’s “Power Lunch” on Jan. 17, saying oil prices will rebound but that it will not happen overnight.

“The market is not going to buy forward expectations of supply cuts,” Currie said. “It’s not going to buy promises from China for policy stimulus. It needs to see real physical tightness.”

Energy prices

The January light, sweet crude contract on the New York Mercantile Exchange dropped $3.64 to close at $46.24/bbl. The February contract dropped $3.60 to $46.60/bbl.

Natural gas futures for January gained 31¢ to close at a rounded $3.84/MMbtu on Dec. 18.

Ultralow-sulfur diesel for January edged down less than 1¢ to remain at a rounded $1.75/gal. The NYMEX reformulated gasoline blendstock for January decreased nearly 6¢ to a rounded $1.35/gal.

Brent crude oil for February dropped $3.35 to $56.26/bbl on London’s International Commodity Exchange. The March contract dropped $3.43 to $56.23. The gas oil contract for January was $530.25/tonne, down $20.

OPEC’s basket of crudes for Dec. 18 averaged $56.08, down $2.16 from the previous day.

Contact Paula Dittrick at [email protected].