MARKET WATCHOil prices take plunge on OPEC announcement
Crude futures prices fell more than $2/bbl in trading Feb. 12 in New York "as the Saudi Oil Minister stated that further production cuts by [the Organization of Petroleum Exporting Countries] would likely not be needed," said analysts in the Houston office of Raymond James & Associates Inc.
By OGJ editors
HOUSTON, Feb. 13 -- Crude futures prices fell more than $2/bbl in trading Feb. 12 in New York "as the Saudi Oil Minister stated that further production cuts by [the Organization of Petroleum Exporting Countries] would likely not be needed," said analysts in the Houston office of Raymond James & Associates Inc.
The March contract for benchmark US light, sweet crudes lost $2.08 to settle at $57.81/bbl Feb. 12 on the New York Mercantile Exchange.
The Saudi Oil Minister's announcement follows a report from Paris-based International Energy Agency saying that "OPEC's previously enacted cuts helped reduce the stockpiles that had existed throughout this winter season," Raymond James analysts noted. "Adding to this downward pressure on prices was warmer-than-normal weather forecasts in the northeastern US...along with the announcement by Occidental [Petroleum Corp.] that its Elk Hills field (120,000 b/d of oil equivalent) should restart shortly," they said.
Prices for natural gas also fell "sharply" Feb. 12 "as weather continues to drive the market's sentiment," Raymond James analysts said. "As a reference point, however," they said, "prices have risen substantially since the beginning of the year, climbing nearly 15%."
The March natural gas contract was down 60.1¢ Feb. 12 to close at $7.23/MMbtu on NYMEX.
Meanwhile, IEA raised its global oil demand estimates and reduced its supply estimates again. Estimated demand in 2006 has been increased to 84.5 million b/d from 84.4 million b/d, and to 86 million b/d from 85.8 million b/d in 2007.
"The change was due primarily to revisions in estimates for China and factors in OPEC production cuts," Raymond James analysts said. Raymond James's estimates for 2006 and 2007 were 84.2 million b/d and 85.6 million b/d, respectively. Also, they have revised slightly downward non-OPEC supply to 50.5 million b/d. "The picture painted here, in both the supply and demand outlook, more clearly shows a continued tightening of the world oil market," they said.
The April contract for benchmark US light, sweet crudes lost $2 to close at $58.63/bbl on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., slid by $2.08 to $57.82/bbl.
Heating oil for March delivery fell by nearly 8¢ closing at $1.65/gal on NYMEX. The March contract for reformulated blend stock for oxygenate blending (RBOB) declined by 6¢ to $1.55/gal.
On the US spot market, natural gas at Henry Hub, La., lost 38¢ to $7.775/MMbtu.
In London, the March IPE contract for North Sea Brent crude dipped by $2.41 to $56.60/bbl. Gas oil for February delivery, meanwhile, remained unchanged Feb. 12 at $526.25/tonne.
The average price for OPEC's basket of 11 benchmark crudes fell by $1.05 Feb. 12 to $53.94/bbl.