MARKET WATCH: Crude oil prices slump on rising US tight oil output

Oil prices fell on markets in New York and London Mar. 12, and the US benchmark continued falling in early trading Mar. 13 after the US Energy Information Administration’s latest drilling report forecast tight oil production will rise by 131,000 b/d in April to 6.95 million b/d.

Oil prices fell on markets in New York and London Mar. 12, and the US benchmark continued falling in early trading Mar. 13 after the US Energy Information Administration’s latest drilling report forecast tight oil production will rise by 131,000 b/d in April to 6.95 million b/d.

The Drilling Productivity Report focuses on seven key US unconventional regions, using recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells.

Commerzbank analysts said, “The rapidly growing US shale production is making it virtually impossible for prices to rise.”

J.P. Morgan analysts issued a Mar. 9 research note saying, “Markets are starting to fear that US shale’s growth could undermine oil market balance by the end of 2018.”

Oil analysts generally agree that increasing US oil supply could counteract production-cut targets by the Organization of Petroleum Exporting Countries and other major producers. The production-cut targets are a collective effort by OPEC and others, including Russia, to support oil prices.

Meanwhile, Saudi Arabia has suggested it would like crude prices at $70/bbl while Iran suggests $60/bbl would be more effective at maintaining a supply-demand balance on world oil markets.

OPEC is scheduled to release its monthly Oil Market Report on Mar. 14 while the International Energy Agency is scheduled to release its monthly report on Mar. 15.

Energy prices

The April light, sweet crude contract on the NYMEX fell 68¢ on Mar. 12 to settle at $61.36/bbl. The May contract dropped 59¢ to $61.33/bbl.

The NYMEX natural gas price for April rose 4.6¢ to a rounded $2.78/MMbtu. The Henry Hub cash gas price was up 9¢ to $2.77/MMbtu on Mar. 12.

Ultralow-sulfur diesel for April decreased by 2¢ to a rounded $1.87/gal. The NYMEX reformulated gasoline blendstock for April fell 1¢ to $1.89/gal.

Brent crude oil for May dropped 54¢ to $64.95/bbl on London’s International Commodity Exchange. The June contract was down 48¢ to $64.79/bbl. The gas oil contract for April was $568/tonne, down $7.75.

OPEC’s basket of crudes was $62.53/bbl on Mar. 12, up 58¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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