Crude oil futures prices dropped more than $1/bbl on the New York and London markets Mar. 1 following separate reports of declines in US manufacturing statistics and Chinese factory activity, which analysts said contributed to concerns about potentially slowing oil demand.
US and Chinese manufacturing numbers are considered fuel-demand growth indicators.
Ole Hansen, head of commodity strategy at Saxo Bank, said Brent crude oil prices appear to be bound within $64-68/bbl, at least for now.
“Crude oil experienced a rollercoaster week,” Hansen said. It started with a Feb. 25 tweet from US President Donald Trump saying the Organization of Petroleum Exporting Countries and other producers need to “take it easy” on production cuts.
Trump suggested the world is too “fragile” to handle oil price hikes now. Despite Trump’s remarks, oil prices strengthened on comments from Saudi Arabia’s energy minister saying the current production-cut deal could be extended into the second half.
Barclays analysts kept their previous $70/bbl Brent forecast for 2019.
“We think the biggest source of uncertainty for oil markets this year is not the US, but OPEC’s response to US policy decisions,” Barclays said in a Mar. 3 Blue Drum research note.
Separately, a Bloomberg survey showed OPEC’s February production slumped by 560,000 b/d to 30.5 million b/d, a near 4-year low. Separately, Russia’s Energy Minister Alexander Novak said Russia has cut output by nearly 150,000 b/d.
An indicator of future US production is the weekly Baker Hughes rig count. The drilling rig count dropped 9 units to 1,038 rigs working for the week ended Mar. 1, the service company reported. The latest count was up 57 units from the 981 rigs working at the same period a year ago (OGJ Online, Mar. 1, 2019).
The US Department of Energy Office of Fossil Energy plans to sell as much as 6 million bbl of crude oil from the Strategic Petroleum Reserve. Contracts are expected to be announced no later than Mar. 15 with deliveries in April and May.
As of Feb. 22, the total SPR inventory was 649.1 million bbl of which 254.6 million bbl was light, sweet crude and the rest was sour crude.
Energy prices
The April contract for light, sweet crude oil on the New York Mercantile Exchange fell $1.42 to settle at $55.80/bbl on Mar. 1. The contract for May delivery also dropped $1.42 to settle at $56.19/bbl.
NYMEX natural gas for April rose nearly 5¢ to a rounded $2.86/MMbtu on Mar. 1.
Ultralow-sulfur diesel for April declined 2¢ to $2/gal. The NYMEX reformulated gasoline blendstock for April decreased 2¢ to a rounded $1.73/gal.
Brent crude for April delivery dipped by $1.24 to $65.07/bbl while the May contract also decreased $1.24 to settle at $65.07/bbl.
The gas oil contract for March fell $10.50 to $614.50/tonne on Mar. 1.
The average price for OPEC’s basket of crudes was $65.32/bbl on Mar. 1, up 4¢.
Contact Paula Dittrick at [email protected].
