Oil prices rose for a while on the New York market Jan. 23 on news of the death of Saudi Arabia King Abdullah but dropped before the settlement, closing at the front-month’s lowest level since March 2009.
During Jan 23 trading, prices reached a daily high of $47.76/bbl before settling at $45.59/bbl. For the week, New York Mercantile Exchange oil prices lost about 7%, and NYMEX crude has been down for 15 of the last 17 weeks.
Traders and analysts said they expect no change in Saudi oil policy. The new king is the late king’s half-brother, Salman bin Abdul Aziz. Analysts said all indications were that Oil Minister Ali Al-Naimi would remain, and that Saudi Arabia would continue defending its market share.
John Westwood of Douglas-Westwood in London issued a Jan. 26 research note saying investment in oil production already is being hard hit.
“Around 400,000 low-output striper wells each pump less than 10 b/d, but in total produce three-quarters of a million b/d and are prime candidates,” Westwood said. “On the other end of the scale, BHP Billiton, for example, has said it would cut back on its planned $4 billion spending on US shale assets.”
He noted production from wells declines over time naturally. Unless production continues to be added, Westwood said surplus capacity will quickly be eroded.
“The next oil price surge is already being set up,” Westwood said.
US natural gas prices gained upon updated forecasts calling for cold temperatures, particularly in the New York region where a blizzard was expected to hit New York City Jan. 26. For the week, gas prices lost more than 4%, and gas futures prices have been down 8 of the last 9 weeks.
The natural gas contract for February delivery was up 15¢ to a rounded $2.99/MMbtu. Meanwhile, the cash gas price at Henry Hub, La., was $2.96/MMbtu on Jan. 23, up 3¢.
Heating oil for February edged up less than 1¢ to a rounded $1.65/gal. Reformulated gasoline stock for oxygenate blending for February was up 1.7¢ to a rounded $1.35/gal.
The March ICE contract for Brent crude oil rose 27¢ to settle at $48.79/bbl. The April contract climbed 25¢ to $49.94/bbl. The ICE gas oil contract for February was up $2.75 to $477/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Jan. 23 was $43.69/bbl, up 64¢ from the previous day.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.