MARKET WATCH: NYMEX crude oil price for February settles under $53/bbl

Oil futures fell more than $1/bbl on the New York and London markets Jan. 3 while the value of the US dollar rose. Analysts said many market participants doubt whether major producers will cut production in 2017 as they agreed in 2016.

During the Jan. 3 trading session, the US benchmark crude rose above $55/bbl for the first time since July 2015. The Jan. 3 low for February delivery was just above $52/bbl.

Oil-price support came after reports that officials in Oman and Kuwait said they were enacting the agreed-upon cuts.

The Organization of Petroleum Exporting Countries agreed to cut the group’s production by 1.2 million b/d starting in January. Some non-OPEC producers agreed to cut 558,000 b/d with Russia alone to account for 300,000 b/d.

A strengthening dollar weighed on crude prices, analysts said. Oil is traded in dollars and becomes more expensive for buyers using other currency when the dollar rises. The Wall Street Journal’s Dollar Index, which measures the dollar against a basket of currencies, recently rose 0.29%.

Biraj Borkhataria, an analyst with the Royal Bank of Canada in London, said RBC has forecast an average 2017 Brent price of $58/bbl.

“We see at least another year of potential cost-reduction momentum,” by the majors while the oil market rebalances, Borkhataria said.

“With 2016 seen as a transition year, most of the majors have given free cash-flow breakeven targets for 2017 in the $50-60/bbl range. We see the sector being free cash-flow neutral at $58/bbl in 2017,” Borkhataria said of RBC estimates.

Energy prices

The February crude oil contract on the New York Mercantile Exchange dropped $1.39 on Jan. 3 to close at $52.33/bbl. The March contract declined $1.37 to $53.29/bbl.

The natural gas contract for February was down nearly 40¢ to a rounded $3.33/MMbtu. The Henry Hub spot market for gas closed at $3.39/MMbtu on Jan. 3.

Heating oil for February fell 5¢ to a rounded $1.68/gal. Reformulated gasoline stock for oxygenate blending for February declined nearly 5¢ to a rounded $1.62/gal.

The Brent crude contract for March on London’s ICE was down $1.35 to $55.47/bbl. The April contract also decreased $1.35 to $56.14/bbl. Gas oil for January closed Jan. 3 at $493.25/tonne, down $7.25.

The average price for OPEC’s basket of benchmark crudes for Jan. 3 was $53.13/bbl, down 17¢.

Contact Paula Dittrick at [email protected].