MARKET WATCH: Crude benchmark prices drop in correction after OPEC
Crude oil benchmarks settled down by more than $1.60/bbl on Dec. 10 in a market correction to an initial surge in oil prices on Dec. 7 following news that the Organization of Petroleum Exporting Countries and 10 non-OPEC countries agreed to cut production by 1.2 million b/d.
Harry Tchilinguirian, analyst with BNP Paribas, told Reuters the 1.2 million b/d in production cuts “should be enough to largely attenuate but not eliminate expected global inventory builds in the first half of next year.”
Major producers agreed to the cuts after oil prices fell about 30% since October on oil investors’ concerns about increasing world oil supply and slowing economic growth, which could slow world oil demand.
On Dec. 10, US crude futures for January delivery settled at $51/bbl. On Dec. 7, light, sweet crude oil prices on the New York market briefly reached $54.22/bbl before settling at $52.61/bbl.
Meanwhile, Brent crude oil for February delivery settled just under $60/bbl on Dec. 10. Immediately after the OPEC news, Brent reached $63.73/bbl before settling at $61.67/bbl on Dec. 7.
OPEC agreed to supply 800,000 b/d of the cuts with participating non-OPEC countries to contribute the rest. Russia agreed to cut its production by 230,000 b/d. Iran, Venezuela, and Libya were exempted from the cuts.
The cuts, effective for 6 months starting Jan. 1, 2019, will be based upon October 2018 production levels (OGJ Online, Dec. 7, 2018).
Energy prices
The January light, sweet crude contract on the New York Mercantile Exchange fell $1.61 to close at $51/bbl. The February contract decreased $1.61 to close at $51.20/bbl.
Natural gas futures for January gained nearly 6¢ to close at $4.54/MMbtu on Dec. 10.
Ultralow-sulfur diesel for January declined 4¢ to a rounded $1.84/gal. The NYMEX reformulated gasoline blendstock for January decreased by nearly 7¢ to a rounded $1.42/gal.
Brent crude oil for February fell $1.70 to $59.97/bbl on London’s International Commodity Exchange. The March contract decreased $1.75 to $60.10/bbl. The gas oil contract for December was $572.25/tonne, down $15.
OPEC’s basket of crudes for Dec. 10 averaged $59.72/bbl, up 52¢ from the previous day.
Contact Paula Dittrick at [email protected].
About the Author
Paula Dittrick
Senior Staff Writer
Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.
Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.