MARKET WATCH: OPEC basket price closes below $59/bbl

The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while crude oil prices on the New York and London markets also fell.

The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while crude oil prices on the New York and London markets also fell.

The Dec. 12 average marked the first time the OPEC basket had dipped below $60/bbl since oil prices began sliding months ago, which analysts largely attribute to ample world oil supplies.

Barclays Research Inc. issued a Dec. 15 weekly commodities update, saying it expected the world crude oil market will experience significant stock building, particularly in next year’s first quarter.

Analyst Miswin Mahesh in Barclays London office also questioned the future willingness of OPEC members to stick to the quota production mandate given dropping oil prices.

“In our view, as short-term demand remains inelastic, something has to give: time structure, price, or production,” Mahesh said. “Looking ahead, assuming OPEC crude output remains stable, the market is expected to build,” crude oil inventories during 2015.

“The demand response to lower prices remains unclear and is further complicated by the removal of subsidiaries and changes to fuel-consumption taxes in several Asia Pacific markets,” he said, noting that China and India are filling strategic reserves.

Regarding US natural gas futures, Barclays noted that mild weather and strong production are keeping a lid on gas prices “despite a somewhat bullish” weekly gas storage report.

“Recent closes in the $3.60/MMbtu range put prices on a comfortable trajectory with quarter-to-date prices averaging close to our $3.95/MMbtu forecast in the fourth quarter,” Barclays said. “While gas prices have calmed recently, the recent drop in oil prices has incited questions about risks to associated gas production growth, which in our view, is not as vulnerable as one may think.”

Energy prices

The New York Mercantile Exchange January crude oil contract fell $2.14 on Dec. 12, closing at $57.81/bbl. The February contract dropped $2.11 to $58.08/bbl.

The natural gas contract for January settled up 16¢ to a rounded $3.80/MMbtu. The cash gas price at Henry Hub, La., went the opposite direction, dropping 10¢ to $3.58/MMbtu on Dec. 12.

Heating oil for January delivery dropped 4.5¢ to a rounded $2.02/gal. Reformulated gasoline stock for oxygenate blending for January was down by 2.7¢ to a rounded $1.60/gal.

The January 2015 ICE contract for Brent crude oil fell $1.83 to $61.85/bbl. The February contract dropped $1.84 to $62.15/bbl. The ICE gas oil contract for December plummeted $14.75 to $566/tonne.

The average price for OPEC’s basket of 12 benchmark crudes on Dec. 12 was $58.65/bbl, down $1.85.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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