MARKET WATCH: Crude oil futures prices mixed on OPEC, US inventory reports

Crude oil futures settlements were mixed Feb. 16 with US light, sweet crude oil price climbing slightly on the New York market while Brent crude oil prices fell on the London market.

US natural gas futures fell on Feb. 16, but Raymond James & Associates said, “2017 should prove to be a positive year for natural gas prices as demand will be pushed by exports of gas to Mexico and a continued ramp up of LNG exports.”

The US Energy Information Administration estimated natural gas in underground storage across the Lower 48 was 2.445 tcf as of Feb. 10, down 114 bcf from the previous week. Gas storage levels were 303 bcf less than last year at this time and 87 bcf above the 5-year average of 2.358 tcf, the Weekly Natural Gas Report said.

On oil markets, compliance with production cuts by the Organization of Petroleum Exporting Countries and some other major producers has supported oil prices, but that also provides incentive for additional US drilling. Baker Hughes Inc. was scheduled Feb. 17 to release its weekly US rotary rig count.

Harry Tchilinguirian, BNP Paribas head of commodity strategy, estimated 90% compliance by OPEC members of the agreed-upon production cut target of 1.2 million b/d.

“At current levels of compliance and for just a 6-month period, it will not allow them to achieve a goal of reducing global inventories back to their 5-year average, especially when you think about supply growing elsewhere diluting the impact of the cuts they are making,” Tchilinguirian said.

Raymond James & Associates suggests global inventories will begin to materially decline as global demand outstrips global supply regardless of OPEC’s output agreement. RJA noted in a research note that global oil inventories often “slosh around between countries and non-US data is often delayed and sketchy.”

J. Marshall Adkins of RJA in Houston said, “US oil inventories have exploded upward.” EIA estimated US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased by 9.5 million bbl to a record higher 518.1 million bbl for the week ended Feb. 10.

Energy prices

The crude oil contract for March delivery on the New York Mercantile Exchange gained 25¢ on Feb. 16 to $53.36/bbl. The April contract was up 15¢ to $53.75/bbl.

US natural gas futures for March delivery fell 7¢ to a rounded $2.85/MMbtu. The spot gas price at the Henry Hub in Cushing, Okla., declined 10¢ to $2.82/MMbtu.

Heating oil for March edged down less a penny to remain at a rounded $1.63/gal. Reformulated gasoline stock for oxygenate blending for March dropped 2¢ to a rounded $1.53/gal.

The Brent crude contract for April on London’s ICE was down 10¢ to $55.65/bbl. The Brent May contract fell 10¢ to $56/bbl. Gas oil for March closed at $491/tonne, down $3.

The average price for OPEC’s basket of benchmark crudes on Feb. 16 was $53.14/bbl, up 4¢.

Contact Paula Dittrick at paulad@ogjonline.com.