MARKET WATCH: Brent, NYMEX crude oil prices drop before EIA inventory

Light, sweet crude oil prices for April delivery dropped nearly 90¢ on Mar. 21 to settle below $48/bbl on the New York market while Brent crude for May delivery settled below $51/bbl in London.

The US oil benchmark continued dropping in early trading Mar. 22 pending release of the weekly oil and product inventory report by the US Energy Information Administration.

Separately, the American Petroleum Institute said its preliminary estimate showed US commercial crude inventories climbed 4.5 million bbl for the week ended Mar. 17.

Ample oil supplies worldwide contributed to the oil price slump starting in late 2014. Oil prices improved earlier this year but are falling again because crude inventories are declining slower than expected.

Saudi Arabia Energy Minister Khalid al-Falih told the Wall Street Journal that producers are closely watching oil inventory levels before deciding whether to extend production cut targets set last year and implemented in January by the Organization of Petroleum Exporting Countries and others.

There is a “strong willingness” by OPEC members to extend the cuts, he said. OPEC will consider whether to extend the 6-month production targets at its May 25 meeting in Vienna.

Royal Bank of Canada analyst Helima Croft noted a compliance committee of OPEC and non-OPEC representatives is scheduled in Kuwait within days to review compliance with a total reduced output target of 1.8 million b/d, of which OPEC’s share is 1.2 million b/d.

“In our view, domestic concerns will play a critical role, and many of the key discussions about whether to extend the deal will take place in palaces and the offices of presidents and prime ministers,” Croft said.

Energy prices

The crude oil contract for April delivery on the New York Mercantile Exchange dropped 88¢ on Mar. 21 to $47.34/bbl while the May contract fell 67¢ to $48.24/bbl.

The natural gas price for April rose 5¢ to a rounded $3.09/MMbtu. The Henry Hub cash gas price closed at $3.06/MMbtu, up 14¢.

Heating oil for April fell by 1¢ to a rounded $1.50/gal. Reformulated gasoline stock for oxygenate blending for April fell less than a penny to remain at a rounded $1.61/gal.

The Brent crude contract for May on London’s ICE decreased 66¢ to $50.96/bbl. The June contract dropped 60¢ to $51.19/bbl. The gas oil contract settled at $453.25/tonne on Mar. 21, down $5.25.

The average price for OPEC’s basket of benchmark crudes on Mar. 21 was $49.23/bbl, up 5¢.

Contact Paula Dittrick at paulad@ogjonline.com.