Crude oil prices rallied on the New York and London markets on Jan. 30. Brent crude oil prices settled at just under $53/bbl, which was its highest closing in about 3 weeks. The US light, sweet crude oil closed above $48/bbl.
Analysts attributed the New York oil price rally to the Baker Hughes Inc. rig count showing the number of rigs drilling fell by 90, or 7%, for the weekend ended Jan. 30 (OGJ Online, Feb. 2, 2015). Most of the decline came in Texas.
Gaffney, Cline & Associates said the Jan. 30 oil price rally begs the question of whether the oil price has reached its bottom, and if so, whether the bottom will be the start of a V-shaped recovery or something slower.
Bob George, GCA executive director and senior strategic advisor, said, “The markets appear to have reacted sharply to the drop in rig count, believing that this will translate into a meaningful drop in liquids production.”
GCA petroleum economist Cecilia Jing Cui said changes in production always lag changes in the rig count.
“It will be a while before the full effect can be seen. We are currently working on a forecast for 2015 and 2016 onshore liquids production.”
Meanwhile, United Steelworkers Union (USW) members have gone on strike at refineries that produce nearly 10% of US gasoline, diesel, and other fuels after contract negotiations broke down over salaries and safety.
USW told members at nine refineries and chemical plants from Texas to California to walk out until a deal is reached. The strike involves 3,800 workers, the union said.
Companies hit by the strike included Royal Dutch Shell PLC, Tesoro Corp., Marathon Petroleum Corp., and LyondellBasell Industries. The Wall Street Journal reported those companies said they would keep refineries operating under contingency plans, including nonunion labor.
Unless an agreement is reached this week, a Frost & Sullivan spokesman told the Wall Street Journal, that he believes, “You can forget about $2[/gal] gasoline.”
Carl Larry, director of Frost & Sullivan oil and gas consulting, said, “It’s going to be a big deal. People are going to be freaked out.”
The NYMEX March crude oil contract gained $3.71 on Jan. 30, closing at $48.24/bbl. The April contract rose $3.69 to $48.99/bbl.
The New York Mercantile Exchange gas contract for March settled down 2.8¢ to $2.69/MMbtu on the New York Mercantile Exchange. On the cash gas market, the Henry Hub, La., hub gas price dropped by 20¢ to $2.68/MMbtu on Jan. 30.
Heating oil for February rose 6.8¢ to a rounded $1.69/gal. Reformulated gasoline stock for oxygenate blending for February was up 6¢ to a rounded $1.41/gal.
The March ICE contract for Brent crude oil gained $3.86 to settle at $52.99/bbl. The April contract was up $3.80 to $53.95/bbl. The ICE gas oil contract for February rose $4.75 to $478.25/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Jan. 30 was $44.83/bbl, up 95¢ from the previous day.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.