MARKET WATCH: NYMEX crude oil prices fall below $78/bbl

Crude oil futures prices continued falling on New York and London markets Nov. 4 with US benchmark light, sweet crude contracts dropping below $78/bbl for delivery in December and January 2015 while the Brent contract for December delivery dropped below $83/bbl.

Crude oil futures prices continued falling on New York and London markets Nov. 4 with US benchmark light, sweet crude contracts dropping below $78/bbl for delivery in December and January 2015 while the Brent contract for December delivery dropped below $83/bbl.

“No end to the nosedive is in sight either, meaning that Brent could well be putting the $80 mark to the test before long,” Commerzbank said in a research note, noting that Saudi Arabia “still does not appear willing to reduce its supply and thus remove oversupply from the market.”

The Saudis reduced price differentials for US crude oil shipments while increasing price differentials for Asian crude oil shipments (OGJ Online, Nov. 4, 2014).

HSBC’s China services purchasing managers index for October came out at 52.9, marking its second consecutive month to show a decline. Analysts called the index the latest sign of slow economic growth in China, which could put a damper on world oil demand.

Barclays Research Inc. issued a research note repeating its earlier statement that it expects oil prices will rebound during second-half 2015. On Nov. 5, Barclays also reviewed the likely supply response of US tight oil supplies if oil prices were to continue falling.

“We think most producers will sweat it out and achieve their stated production objectives in 2015,” with light, sweet crude oil prices at $80/bbl, Barclays said.

“But, if prices do remain lower and fall to $70[/bbl] for all of 2015, half of proven and probable remaining US tight oil reserves would be challenged,” said analyst Kevin Norrish of Barclays London office. “The near-term (6-month) effect would be marginal, but fewer new volumes would be added,” during the second half 2015 and in 2016.

“On a net basis, that implies a reduction to growth of about 100,000 b/d for 2015 as a whole,” Norrish said. “A growth impact of 100,000 b/d is a drop in the bucket in the context of total non-OPEC growth of around 1.5 million b/d. Thus, we expect downward price pressure to mount unless OPEC supplies less or demand rebounds.”

US oil supplies

US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 500,000 bbl for the week ended Oct. 31 compared with the previous week, the Energy Information Administration said in its weekly petroleum status report.

At 380.2 million bbl, crude oil inventories are in the upper half of the average range for this time of year, EIA said.

Separately, the American Petroleum Institute said its calculations showed US crude oil supplies fell 640,000 bbl for the week ended Oct. 31 compared with the previous week.

Regarding gasoline supplies, EIA said total motor gasoline inventories decreased by 1.4 million bbl last week, and are below the lower limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week.

Distillate fuel inventories decreased by 700,000 bbl and are near the lower limit of the average range for this time of year, EIA said. Propane-propylene inventories fell 100,000 bbl but are well above the upper limit of the average range for this time of year.

Refinery inputs averaged 15.5 million b/d during the week ended Oct. 31, which was 356,000 b/d more than the previous week’s average. Refineries operated at 88.4% of capacity last week.

Gasoline production increased last week, averaging 9.7 million b/d, EIA said. Distillate fuel production increased last week, averaging 4.6 million b/d.

US crude oil imports averaged 6.7 million b/d last week, down by 426,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged over 7.2 million b/d, which was 4.4% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, averaged 531,000 b/d, and distillate fuel imports averaged 109,000 b/d last week.

Energy prices

The New York Mercantile Exchange December crude oil contract fell $1.59 on Nov. 4, closing at $77.19/bbl. The January 2015 contract fell $1.65 to $77.19/bbl.

The natural gas contract for December gained 8¢ to a rounded $4.13/MMbtu. The cash gas price at Henry Hub, La., was $3.66/MMbtu, down 6¢.

Heating oil for December delivery was down 4.7¢ to a rounded $2.44/gal. Reformulated gasoline stock for oxygenate blending for December delivery lost nearly 4¢ to a rounded $2.08/gal.

The December ICE contract for Brent crude oil was down $1.96 to $82.82/bbl. The January 2015 contract fell $1.92 to $83.38/bbl. The ICE gas oil contract for November dropped $20.25, settling at $726.25/tonne.

The average price for OPEC’s basket of 12 benchmark crudes was $78.67/bbl on Nov. 4, dipping by $1.97 from the previous day.

Contact Paula Dittrick at paulad@ogjonline.com.

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