MARKET WATCH: NYMEX’s January contract expires with a daily gain

Light, sweet crude oil prices gained more than $2/bbl on the New York market Dec. 19 as the January contract expired and upon a wire service report Nigeria is planning to reduce crude exports in February.

Light, sweet crude oil prices gained more than $2/bbl on the New York market Dec. 19 as the January contract expired and upon a wire service report Nigeria is planning to reduce crude exports in February.

In dollars, the Dec. 19 trading gains were the largest since Dec. 1 for the US benchmark crude, which has increased in three of the last four sessions. Yet despite the Dec. 19 gain, the front-month crude oil contract still ended lower for the week for the fourth consecutive week.

Nigeria plans to export 271,000 b/d of Qua Iboe crude in February, down from 398,000 b/d in January, Reuters reported Dec. 19, citing a schedule provided by a trade source. The oil will be loaded on eight cargoes, five fewer than in January.

The drop comes as Nigerian crude oil differentials have fallen to the lowest in years. The US is importing less crude overall, including Nigerian crude, because of higher US production, particularly from unconventional plays.

"There is some maintenance taking place," in Nigeria, a trade source told Reuters, regarding the drop in exports. "This could be a blessing in disguise," he said of ample world oil supplies.

Separately, Emilio Lozoya, chief executive officer of Mexico’s Petróleos Mexicanos said the sharp drop in oil prices has prompted Pemex to make plans to offer international oil companies a greater share of projects than initially envisioned.

Mexico is opening its upstream activities to companies other than Pemex. Lozoya told the Wall Street Journal in an interview that Pemex is considering how to accelerate joint ventures.

“This puts pressure on us to get the joint ventures going,” Lozoya said, noting that oil companies around the world are announcing or planning to cut costs and investments to offset lower oil prices.

Lozoya said he wanted “to make sure that Pemex’s capital expenditure plans for exploration and production are the least affected.”

The US onshore rig count also went down again. Baker Hughes Inc. said Dec. 19 the number of rotary rigs drilling for oil in the US fell for the seventh time in 10 weeks to the lowest level since May.

US natural gas futures prices on Dec. 19 settled at the lowest price since Nov. 4, 2013.

The Energy Information Administration estimated the level of gas in underground storage in the Lower 48 on Dec. 12 at slightly above 2013 levels for the first time this year. Inventories totaled nearly 3.3 tcf on Dec. 12.

Previously, gas storage levels fell sharply in early 2014 because of extremely cold weather, and remained at or below the 5-year minimum level up until Dec. 12, according to statistics from the weekly EIA gas storage report.

Despite concerns about a possible storage deficit going into the 2014-15 heating season, the year-over-year gap in inventories has continually fallen since April. Storage levels are still 258 bcf lower than the 5-year average, but this gap also narrowed substantially since April, EIA said.

Energy prices

The New York Mercantile Exchange January crude oil contract gained $2.41 on Dec. 19, closing at $56.52/bbl. The February contract surged by $2.77 to $57.13/bbl as the January contract expired.

Much of the crude trading volumes had already shifted to the February contract before the January expiration, analysts noted.

The natural gas contract for January settled down 17.8¢ to a rounded $3.46/MMbtu. The cash gas price at Henry Hub, La., dropped 24¢ to $3.44/MMbtu on Dec. 19.

Heating oil for January delivery climbed 2.35¢ to a rounded $1.96/gal. Reformulated gasoline stock for oxygenate blending for January was up by 3.23¢ to a rounded $1.56/gal.

The February 2015 ICE contract for Brent crude oil rose $2.11 to $61.38/bbl. The March contract climbed $2.17 to $62.05/bbl. The ICE gas oil contract for January rose $4.50 to $548.75/tonne.

The average price for OPEC’s basket of 12 benchmark crudes on Dec. 19 was $55.52/bbl, down 78¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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