MARKET WATCH: NYMEX, Brent crude oil prices plummeting on stronger US dollar

Oil prices plummeted on the New York and London markets Dec. 5 and continued downward in early Dec. 8 trading. Analysts noted both US light, sweet crude oil prices and Brent crude oil prices appeared headed toward 5-year lows as the US dollar strengthened.

Oil prices plummeted on the New York and London markets Dec. 5 and continued downward in early Dec. 8 trading. Analysts noted both US light, sweet crude oil prices and Brent crude oil prices appeared headed toward 5-year lows as the US dollar strengthened.

Oil is traded in US dollars so a stronger dollar makes the commodity more expensive for oil buyers using foreign currencies. The dollar strengthened on signs of an improving US economy.

Morgan Stanley has lowered its Brent crude oil price forecasts, saying it sees oil averaging $70/bbl in 2015 given abundant world oil supply. This was a $28/bbl drop from its earlier forecast.

Analysts said Brent prices gradually could recover to average $100/bbl in 2017. Previously, Morgan Stanley had forecast a $114/bbl average for 2017.

“Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015,” analysts Adam Longson and Elizabeth Volynsky said in a Dec. 5 report referring to the Organization of Petroleum Exporting Countries, which decided Nov. 27 to maintain existing production quotas for its members.

On Dec. 8, Brent futures hit $67.52/bbl, its lowest low level since October 2009.

Separately, ConocoPhillips announced plans to cut its capital spending to $13.5 billion in 2015, which is down 20% from 2014. The reduction in spending includes deferral of spending on North American unconventional projects, the company said on Dec. 8.

Energy prices

The New York Mercantile Exchange January crude oil contract fell 97¢ on Dec. 5, closing at $65.84/bbl. The February contract dropped 94¢ to $65.96/bbl.

The natural gas contract for January climbed 15¢ to a rounded $3.80/MMbtu. The cash gas price at Henry Hub, La., was $3.43 on Dec. 5, down 12¢.

Heating oil for January delivery fell nearly a penny to a rounded $2.11/gal. Reformulated gasoline stock for oxygenate blending for January was down 2¢ to a rounded $1.77/gal.

The January 2015 ICE contract for Brent crude oil dropped 57¢ to $69.07/bbl. The February contract fell 59¢ to $69.49/bbl. The ICE gas oil contract for December dropped $3.50, settling at $618.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes on Dec. 5 was not available.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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