MARKET WATCH: Crude prices head toward weekly loss on supply, storm concerns

Oct. 6, 2017
Brent and US crude oil prices appear to be ending the first full week of October with a loss following a strong September rally.

Brent and US crude oil prices appear to be ending the first full week of October with a loss following a strong September rally.

Prices declined more than $1 early on Oct. 6 on London’s ICE and the New York Mercantile Exchange on continued oversupply concerns as well as the prospect that Tropical Storm Nate could impact critical US Gulf Coast oil systems just a month after Hurricane Harvey wreaked havoc on the region.

According to data from the US Energy Information Administration, US crude exports reached an all-time high of nearly 2 million b/d last week, adding further US supply to a global oil market in which the Organization of Petroleum Exporting Countries has grappled with ceding market share.

S&P Global Platts this week reported that OPEC production increased 100,000 b/d in September despite strong compliance by members participating in a deal to curtail output by 1.2 million b/d. OPEC’s monthly total production of 32.66 million b/d was 740,000 b/d above its declared ceiling, the information services firm said.

Both OPEC and certain nonmembers are collectively cutting output by about 1.8 million b/d through March 2018 compared with late 2016 production levels.

An indicator as to whether US production will remain resilient, Baker Hughes' weekly tally of active drilling rigs in the US will be released midday Oct. 6. Last week, US oil-directed rigs jumped 6 units, though they were down 18 since their recent high on Aug. 11.

Storm preparations

Tropical Storm Nate is expected to move over the central gulf and make landfall on the US Gulf Coast this weekend—possibly as a hurricane—while the effects of refinery and transportation outages caused by Harvey still linger on the oil market.

Saying that he anticipates landfall near New Orleans, Louisiana Gov. John Bel Edwards has declared a state of emergency for the state, which has 18 operable refineries with capacity totaling about 3.3 million b/d. Marathon Petroleum Corp.'s 543,000-b/d Garyville refinery and ExxonMobil Corp.'s ‎502,500-b/d Baton Rouge refinery, both among the largest in the US, are within range of the storm's anticipated path.

BP PLC said it has begun removing all its remaining offshore personnel and shutting-in production at its Atlantis, Mad Dog, Na Kika, and Thunder Horse operated platforms.

Chevron Corp. is evacuating and shutting output from its Blind Faith, Genesis, Jack-St.Malo, Petronius, and Tahiti facilities. Royal Dutch Shell PLC said production is being shut-in, drilling operations have been suspended, and all personnel are returning to shore from its Mars, Ursa, Olympus, and Ram Powell production hubs.

Anadarko Petroleum Corp. is removing staff and shutting output from its Horn Mountain and Marlin facilities. BHP Billiton Ltd. is doing the same from its Shenzi and Neptune platforms. ExxonMobil is evacuating its Lena platform, while Statoil ASA has removed staff from its Titan platform.

As of 11:30 a.m. CDT on Oct. 5, the US Bureau of Safety and Environmental Enforcement estimated that 14.55% of US gulf crude oil production, or 254,607 b/d, was shut (OGJ Online, Oct. 5, 2017).

Energy prices

The November light, sweet crude contract on the New York Mercantile Exchange gained 81¢ to $50.79/bbl on Oct. 5. The December contract rose 83¢ to $51.15/bbl.

The NYMEX natural gas price for November dropped 1.7¢ to a rounded $2.92/MMbtu. The Henry Hub cash gas price was $2.91/MMbtu, jumping 10¢.

Heating oil for November increased 1.24¢ to a rounded $1.79/gal. The NYMEX reformulated gasoline blendstock for November rose 3.01¢ to a rounded $1.61/gal.

The Brent crude contract for December on London’s ICE dropped climbed $1.20 to $57/bbl. The January contract was up $1.11 to $56.71/bbl. The gas oil contract for October increased $12 to $540.25/tonne.

OPEC’s basket of crudes for Oct. 5 was $54.63/bbl, up 70¢.

Contact Matt Zborowski at [email protected].