MARKET WATCH: NYMEX crude oil prices drop below $89/bbl range

Crude oil prices on the New York market for November and December each dropped more than $1/bbl to close the Oct. 7 trading session, and analysts attributed the price dip to rising US production combined with recent downward revisions in global demand forecasts.

Crude oil prices on the New York market for November and December each dropped more than $1/bbl to close the Oct. 7 trading session, and analysts attributed the price dip to rising US production combined with recent downward revisions in global demand forecasts.

In early Oct. 8 trading, US light, sweet crude oil traded near its lowest levels since April 2013. Meanwhile Brent crude oil prices dropped to their lowest since June 2012.

Ole Hansen, head of Commodity Strategy at Saxo Bank, noted the average price for the main crude grades produced by the Organization of Petroleum Exporting Countries dropped below $90/bbl on Oct. 7.

“This is the lowest price since June 2012, and it highlights the current unease within the organization, with no members showing any willingness to reduce production,” Hansen said. “As long as the cartel continues to produce more crude oil than the world requires, the focus on oversupplied markets will continue to be the main driver. This may lead to even lower prices.”

In its latest Short-Term Energy Outlook, the US Energy Information Administration said it expects Brent crude oil prices will average $104/bbl in 2014 and $102/bbl in 2015, which is $2/bbl and $1/bbl lower, respectively, than EIA’s previous forecast (OGJ Online, Oct. 7, 2014).

Inventory estimates rise

EIA on Oct. 8 issued its weekly petroleum status report, saying it estimated US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased 5 million bbl for the week ended Oct. 3 compared with the previous week.

At 361.7 million bbl, crude oil inventories are in the upper half of the average range for this time of year, EIA said. The American Petroleum Institute said its own survey showed oil inventories rose 5.1 million bbl last week.

Regarding gasoline supplies, EIA estimated total motor gasoline inventories increased 1.2 million bbl for the week ended Oct. 3, putting levels in the middle of the average range.

Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased 400,000 bbl and are in the lower half of the average range for this time of year. Propane-propylene inventories rose 1.1 million bbl, and levels are well above the upper limit of the average range, EIA sad.

US refinery inputs averaged 15.6 million b/d during the week ended Oct. 3, which EIA said was 135,000 b/d less than the previous week’s average. Refineries operated at 89.3% of capacity.

Gasoline production decreased last week, averaging 8.9 million b/d. Distillate fuel production also decreased last week, averaging more than 4.7 million b/d.

US crude oil imports averaged more than 7.7 million b/d for the week ended Oct. 3, up 428,000 b/d from the previous week, EIA said.

Over the last 4 weeks, crude oil imports averaged 7.5 million b/d, which was 6% below the same period last year. Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 417,000 b/d. Distillate fuel imports averaged 47,000 b/d.

Energy prices

The New York Mercantile Exchange November crude oil contract dropped $1.49 on Oct. 7, closing at $88.85/bbl, while the December contract dropped $1.36 to $87.98/bbl.

The natural gas contract for November rose 5.9¢ to a rounded $3.96/MMbtu while the US benchmark cash gas price edged downward. The closing price at Henry Hub, La., on Oct. 7 was $3.87, down 1¢.

Heating oil for November delivery declined 1.4¢ to a rounded $2.61/gal. Reformulated gasoline stock for oxygenate blending for November delivery gave up a rounded 4.5¢ to $2.37/gal.

The November ICE contract for Brent crude oil was down 68¢ to close at $92.11/bbl. The December contract was down 76¢ to $92.57/bbl. The ICE gas oil contract for October gave up $1.75¢, settling at $777/tonne.

The average price for OPEC’s basket of 12 benchmark crudes was $89.37/bbl on Oct. 7, down $1.03.

Contact Paula Dittrick at paulad@ogjonline.com.

More in Economics & Markets