MARKET WATCH: NYMEX crude oil prices retreat to below $50/bbl
US light, sweet crude oil prices for April delivery settled below $50/bbl on the New York market Feb. 23, and analyst said oversupply fears were likely to extend price losses.
Keith Parker, Barclays head of global asset allocation research, Americas, devised a model to assess the sustainability of lower oil prices and their effects on the global economy and markets. His report came in the Equity Gilt study, an in-depth analysis of medium- and long-term economic and market issues.
“The medium-term drivers in our model suggest that lower oil prices are likely to persist,” Parker said. “Demand growth is slowing, driven by energy efficiency and lower aggregate growth globally. Moreover, oil should remain a well-supplied market with US tight oil keeping OPEC in check,” he said of the Organization of Petroleum Exporting Countries.
The magnitude and speed of the collapse in oil has roiled markets. Only the selloffs in 1997-98, 1986, and 2008 were larger declines, respectively, than the recent one, he said. The 1997-98 price drop was 61%, the 1986 decline was 67%, and the 2008 dip was 73% compared with the recent one of 60%, he said.
Meanwhile, a strong dollar also put a damper on oil prices. The Wall Street Journal Dollar Index rose 0.5% on Feb. 23. The index tracks the dollar against a basket of other major currencies. Previously, Barclays analysts warned that a strengthening dollar could mitigate a price recovery.
But on Feb. 24, Brent crude oil prices rose on the London market upon news reports that production was stopped again at Libya’s Sarir oil field because of an interruption in electric power. Production had only recently resumed after a pipeline explosion that was blamed on militants earlier this month.
The Financial Times on Feb. 23 said Nigeria was ready to request an OPEC extraordinary meeting if oil prices continue dropping.
The New York Mercantile Exchange crude oil contract for April delivery was down $1.36 to $49.45/bbl Feb. 23 while the May contract declined $1.08 to $51.01/bbl.
The natural gas contract on NYMEX for March dropped 7¢ to a rounded $2.88/MMbtu. The Henry Hub, La., gas price was $3.19/MMbtu on Feb. 23, up 21¢.
Heating oil for March climbed 10.6¢ to a rounded $2.22/gal. Reformulated gasoline stock for oxygenate blending for March delivery edged up less than a penny to a rounded $1.65/gal.
The April ICE contract for Brent crude oil dropped $1.32, settling at $58.90/bbl. The May contract was down $1.12 to $59.65/bbl. The ICE gas oil contract for March lost $1.50 to $580/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Feb. 23 was $54.09/bbl, down $2.46.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.