MARKET WATCH: NYMEX, Brent crude oil prices fall on jittery markets

Oil prices dropped more than $2/bbl on jittery New York and London markets Dec. 2 as analysts awaited the weekly US crude oil inventory report and any indicators of potential changes in ample world oil supplies.

Prices had rebounded in trading on Dec. 1 but dropped again the next day following news reports that the Iraqi government agreed to an oil export deal with the northern region of Kurdistan, prompting concerns about the possibility of new oil production adding to an already brimming oil market.

The reported deal could pave the way for better relations between officials in Baghdad and Erbil, capital of the Kurdish Regional Government. A referendum on Iraqi Kurdistan’s independence from Baghdad was suggested 6 months ago because Iraq’s central government sought more control over Kurdish oil exports and revenue.

Separately, Edward Morse, Citigroup head of commodity research, said Citi’s base case oil price scenario is $65/bbl for Brent unless the Organization of Petroleum Exporting Countries takes action to adjust supply or unless some geopolitical event disrupts supply, in which case Citi’s oil price scenario is $80/bbl for Brent.

“If the market is looking to US shale for a [price] floor, Citi thinks that floor is near to $50/bbl WTI than the $90/bbl level frequently cited by senior Saudis in recent weeks,” Morse said of US light, sweet crude prices in a research report.

US crude inventory drops

The Energy Information Administration said US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, decreased by 3.7 million bbl for the week ended Nov. 28 from the previous week. At 379.3 million bbl, oil inventories are in the upper half of the average range for this time of year.

Total motor gasoline inventories increased by 2.1 million bbl, but are well below the lower limit of the average range, EIA said. Finished gasoline inventories decreased while blending components inventories increased last week.

Distillate fuel inventories increased by 3 million bbl for the week ended Nov. 28, and the latest level was near the lower limit of the average range for this time of year, EIA said. Propane-propylene inventories rose 200,000 bbl last week, and that level was well above the upper limit of the average range.

US refinery inputs averaged about 16.4 million b/d during the week ended Nov. 28, marking a 399,000-b/d increase compared with the previous week’s average.

Refineries operated at 93.4% of capacity. Gasoline production decreased slightly last week, averaging 9.6 million b/d. Distillate fuel production increased last week, averaging over 5 million b/d.

US crude oil imports averaged 7.3 million b/d for the week ended Nov. 28, down by 170,000 b/d.

Over the last 4 weeks, crude oil imports averaged over 7.3 million b/d, 6.2% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 724,000 b/d. Distillate fuel imports averaged 122,000 b/d.

Energy prices

The New York Mercantile Exchange January crude oil contract fell $2.12 on Dec. 2, closing at $66.88/bbl. The February contract declined $2.10 to $67/bbl.

The natural gas contract for January dropped 13¢ to a rounded $3.87/MMbtu. The cash gas price at Henry Hub, La., was $3.75 on Dec. 2, down 15¢.

Heating oil for January delivery fell 5.8¢ to a rounded $2.15/gal. Reformulated gasoline stock for oxygenate blending for January fell nearly 7¢ to a rounded $1.81/gal.

The January 2015 ICE contract for Brent crude oil dropped $2 to $70.54/bbl. The February contract fell $2.01 to $70.93/bbl. The ICE gas oil contract for December dropped $5.75, settling at $641/tonne.

The average price for OPEC’s basket of 12 benchmark crudes on Dec. 2 was $68.13/bbl, up $1.69.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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