MARKET WATCH: NYMEX crude oil drops again on storage concerns

Crude oil futures prices for April delivery on the New York market fell by more than $1/bbl to settle Mar. 12 at their lowest level since late January, which analysts blamed on lingering concerns about ample oil supplies and suggestions by some market observers that storage capacity could fill in April.

Crude oil futures prices for April delivery on the New York market fell by more than $1/bbl to settle Mar. 12 at their lowest level since late January, which analysts blamed on lingering concerns about ample oil supplies and suggestions by some market observers that storage capacity could fill in April.

Prices turned lower after Genscape Inc., which tracks storage levels in Cushing, Okla., told clients that inventories at the Cushing hub rose by 2.2 million bbl during Mar. 6-10, the Wall Street Journal reported.

Some traders have grown increasingly concerned that Cushing storage could test capacity levels because crude production remains robust while refineries are processing less crude due to seasonal maintenance (OGJ Online, Mar. 4, 2015).

In its Oil Market Report for March, the International Energy Agency said US oil production was up 115,000 b/d during February, much of it going into storage.

“That would inevitably lead to renewed price weakness,” if storage were to reach its maximum, the report said.

“On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however,” the IEA report said. “Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”

Citigroup Inc. estimated that European commercial crude storage could be more than 90% full, and inventories in South Korea, South Africa, and Japan could be at more than 80% of capacity.

Energy prices

The New York Mercantile Exchange April crude oil contract fell $1.12 to $47.05/bbl Mar. 12, and the May contract dipped 89¢ to settle at $49.13/bbl.

The natural gas contract for April dropped 9¢ to a rounded $2.73/MMbtu. The Henry Hub, La., gas price was $2.82/MMbtu, up 3¢.

Heating oil for April dropped by 4¢ to a rounded $1.78/gal. Reformulated gasoline stock for oxygenate blending for April delivery was down 1.7¢ to a rounded $1.81/gal.

The April ICE contract for Brent crude oil dropped 46¢, settling at $57.08/bbl, and the May contract gave up 60¢ to $52.28/bbl. The ICE gas oil contract for April dropped $6.50 to $539.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Mar. 12 was $53.16/bbl, up 91¢.

Contact Paula Dittrick at paulad@ogjonline.com.

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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