Light, sweet crude oil prices fell modestly Mar. 27 to settle under $60/bbl after the US Energy Information Administration reported a build in crude oil supplies. The increase caught most analysts by surprise because they had expected a third consecutive weekly decline.
The EIA reported crude supplies, excluding the Strategic Petroleum Reserve, rose by 2.8 million bbl for the week ended Mar. 22. At 442.3 million bbl, US crude oil inventories are about 2% below the 5-year average for this time of year (OGJ Online, Mar. 27, 2019).
Before the report was released, a survey of analysts by S&P Global Platts showed analysts anticipated a drop of 2.2 million bbl.
Separate from the EIA inventory, the American Petroleum Institute on Mar. 26 estimated US oil supplies increased 1.9 million bbl for the week ended Mar. 22. The EIA inventory report is the more closely watched of the two reports.
Ajay Rajadhyaksha of Barclays said in a research note that oil benchmark prices are up 25-30% so far in 2019 from the lows of December 2018.
Barclays expects Brent will average $73/bbl in the second quarter while light, sweet crude will average $65/bbl. The firm also expects the Organization of Petroleum Exporting Countries and Russia will decide during a June meeting to keep existing production cuts in place.
“Our view is driven mainly by supply considerations,” Rajadhyaksha said. “We expect Iranian, Venezuelan, and overall OPEC output to remain constrained, leading to a sharp supply-demand deficit in the first quarter.”
US oil supply continues to outperform expectations, Rajadhyaksha said. Barclays analysts expect “capital discipline to constrain new production even if prices rise significantly. The risks to [Barclays] bullish view include outperformance of US tight oil production, a sharp decline in gasoline demand growth, and a souring in global macroeconomic sentiment.”
Energy prices
The May contract for light, sweet crude oil on the New York Mercantile Exchange decreased 53¢ to settle at $59.41/bbl on Mar. 27. The price for June delivery fell 49¢ to settle at $59.61/bbl.
NYMEX natural gas for April fell nearly 3¢ to settle at $2.71/MMbtu.
Ultralow-sulfur diesel for April dropped nearly 1¢ to a rounded $1.98/gal. The NYMEX reformulated gasoline blendstock for April was down 6¢ to a rounded $1.90/gal.
Brent crude for May delivery decreased 14¢ to $67.83 while the June contract fell 19¢ to settle at $67.24/bbl.
The gas oil contract for April was down 50¢ to $608.25/tonne on Mar. 27. OPEC’s basket of crudes climbed 12¢ to average $67.15/bbl on Mar. 27.
Contact Paula Dittrick at [email protected]
