MARKET WATCH: NYMEX crude oil declines after two-session climb

Light, sweet crude oil prices closed lower on May 9, which traders attributed to rising US oil production and uncertainty about what action the Organization of Petroleum Exporting Countries will take regarding a proposed extension of its production-cut agreement.

Light, sweet crude oil prices closed lower on May 9, which traders attributed to rising US oil production and uncertainty about what action the Organization of Petroleum Exporting Countries will take regarding a proposed extension of its production-cut agreement.

An existing agreement between OPEC members and other major producers, including Russia, calls for participants to cut 1.8 million b/d of which OPEC accounts for 1.2 million b/d. The cartel meets May 25 to consider whether to extend the production-cut targets.

The US Energy Information Administration, meanwhile, slightly increased its US crude production forecast to an average 9.31 million b/d for this year and an average output of 9.96 million b/d in 2018. The agency cited the growing US rig count. It also increased its forecast for world oil production.

In its May Short-Term Energy Outlook (STEO), EIA forecast the world’s oil market this year and next will have more supply growth compared with the April STEO, resulting in lower crude oil prices.

World liquid fuels supply was projected to increase by 1.4 million b/d in 2017 and by 1.9 million b/d in 2018. Compared with the April STEO forecast, those growth estimates are higher by 200,000 b/d in 2017 and 100,000 b/d in 2018 (OGJ Online, May 9, 2017).

Energy prices

The light, sweet contract for June crude oil delivery dropped 55¢ to close at $45.88/bbl on the New York Mercantile Exchange on May 9 after briefly reaching a session high of $46.78/bbl. The July contract also declined 57¢ to settle at $46.27/bbl.

The natural gas price for June was up 5.5¢ to a rounded $3.23/MMbtu. The Henry Hub cash gas price held at $3.03/MMbtu on May 9, unchanged from May 8.

Heating oil for June declined slightly more than 1¢ to a rounded $1.44/gal. Reformulated gasoline stock for oxygenate blending for June fell nearly 3¢ to a rounded $1.49/gal.

The Brent crude contract for July on London’s ICE was down 61¢ to settle at $48.73/bbl. The August contract decreased 64¢ to $49.11/bbl. The May gas oil contract gained $3.50 to $433.50/tonne.

OPEC’s basket of crudes was $46.83/bbl on May 9, down 4¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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