Crude oil futures prices plunged on the New York and London markets Jan. 5 upon continuing concerns the world oil market is oversupplied, which some analysts have attributed to robust production from US unconventional plays.
US light, sweet crude for February delivery briefly fell below $50/bbl on the New York Mercantile Exchange, but it rebounded to close at $50.04/bbl. It was the first time the front-month contract has dipped below $50/bbl since April 2009.
Traders said the weakness in NYMEX prices stemmed from how low Brent crude oil prices were falling on the London market.
Saudi Arabia on Jan. 5 reduced the price for oil exported for February delivery to the US. It was the latest in a long series of monthly price cuts. Meanwhile, Saudi Aramco raised its light oil prices in Asia for February.
Moody’s Investor Service issued a report saying “stubbornly low oil prices” will hit the exploration and production companies first. Consequently, service companies and midstream companies will experience the effect of reduced E&P spending.
“Offshore contract drillers are likely to have their toughest year since 2009, and integrated oil majors are the best positioned to react to lower prices.” Moody’s said.
Steven Wood, Moody’s managing director of corporate finance, said if oil prices average $75/bbl in 2015, then US and Canadian exploration and production companies likely would reduce capital spending by around 20% from 2014 levels. If oil prices average below $60/bbl, then spending could be cut by 30-40% from last year, he said.
The NYMEX February crude oil contract fell $2.65 on Jan. 5, closing at $50.04/bbl after briefly dipping to a trading session low of $49.68/bbl. The March contract dropped $2.59 to $50.52/bbl.
The natural gas contract for February settled down 12¢ to a rounded $2.88/MMbtu. The cash gas price at Henry Hub, La., rose 22¢ to $3.21/MMbtu on Jan. 5.
Heating oil for February delivery was down 4.6¢ to a rounded $1.75/gal. Reformulated gasoline stock for oxygenate blending for February declined by 5.2¢ to a rounded $1.38/gal.
The February ICE contract for Brent crude oil plunged $3.31 to $53.11/bbl. The March contract was down $3.09 to $54.17/bbl.
The ICE gas oil contract for January dropped $23.75 to $495.50/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Jan. 5 was unavailable.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.