MARKET WATCH: NYMEX crude oil settles at less than $48/bbl

Crude oil futures prices for February settled at under $48/bbl on the New York Jan. 6, touching a low last reported in April 2009 while Brent crude oil futures on the London market stayed slightly above $51/bbl, the lowest level since early May 2009.

Saudi Arabia Crown Prince Salman blamed weak worldwide oil demand growth for plunging oil prices. He gave a televised speech on behalf of ailing King Abdullah, 90, who was hospitalized with pneumonia.

“This development is not new in the oil market, and the kingdom has in the past dealt with it firmly and wisely,” Salman said. The Saudis have vowed to defend market share rather than reduce oil production.

Ed Morse, director of commodity research for Citigroup Inc., said the oil price drop is supply driven. He sees abundant crude supplies worldwide continuing during the first half of 2015, fed by US shale production.

Morse also said Saudi Arabia’s resistance to cutting its oil production and a weakening global economy are contributing to low oil prices.

Citigroup has cut its forecast for 2015 Brent oil prices, saying its analysts expect an average $63/bbl, down from $80/bbl in an earlier forecast. Morse and other Citigroup analysts expect US light, sweet crude oil will average $55/bbl for 2015.

In a Jan. 5 research note, Citigroup gave its new forecast a 55% probability, saying prices could go lower. Analysts said they believe there is a 30% likelihood that Brent prices could average $55/bbl.

US crude inventory drops

The Energy Information Administration reported US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.1 million bbl for the week ended Jan. 2 from the previous week.

At 382.4 million barrels, US crude oil inventories are well above the upper limit of the average range for this time of year, EIA said.

Total motor gasoline inventories increased by 8.1 million bbl, which EIA said was well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week.

Distillate fuel inventories increased by 11.2 million bbl, and that level is in the lower half of the average range for this time of year. Propane-propylene inventories fell 1.6 million barrels last week but are well above the upper limit of the average range, EIA said.

US refinery inputs averaged over 16.4 million b/d during the week ended Jan. 2, which was 43,000 b/d more than the previous week’s average. Refineries operated at 93.9% of capacity last week.

Gasoline production decreased, averaging 8.7 million b/d. Distillate fuel production decreased last week, averaging 5.2 million b/d.

US crude oil imports averaged about 6.9 million b/d last week, down by 205,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged over 7.3 million b/d, 4.6% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 760,000 b/d while distillate fuel imports averaged 265,000 b/d.

Energy prices

The NYMEX February crude oil contract fell $2.11 on Jan. 6, closing at $47.93/bbl. The March contract dropped $2.06 to $48.46/bbl.

The natural gas contract for February rose 5.6¢ to a rounded $2.94/MMbtu. The cash gas price at Henry Hub, La., dropped 25¢ to $2.96/MMbtu on Jan. 6.

Heating oil for February delivery was down 2.3¢ to a rounded $1.73/gal. Reformulated gasoline stock for oxygenate blending for February declined by 2.7¢ to a rounded $1.35/gal.

The February ICE contract for Brent crude oil dipped $2.01 to $51.10/bbl. The March contract was down $2.04 to $52.13/bbl. The ICE gas oil contract for January dropped $8 to $487.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes on Jan. 6 was $46.69, down $2.30 from the previous day.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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