The light, sweet crude oil futures contract for June delivery rose slightly to settle above $59/bbl on the New York market May 8 after Baker Hughes Inc. reported the US rig count fell to 894 rigs, but it was the smallest drop since early April.
The rig count was down 11 units for the week ended May 8, and the overall rate of decline has slowed in recent weeks (OGJ Online, May 8, 2015).
Barclays Research analysts said global oil supply still exceeds consumption, and they believe a recent price rally was driven by strong demand stemming from factors other than economic recovery.
“On fundamentals, the swift price rise raises risks on both sides of the demand-supply equation,” wrote Barclays analyst Miswin Mahesh in a May 11 Oil Market Outlook note. He said unsold cargoes were building in the North Sea and the Mediterranean. “We continue to highlight fragility in the recent recovery in global oil demand growth.”
He said key physical crude oil market indicators in the Atlantic Basin show signs of weakness, demonstrating what he calls a disconnect between the futures and physical markets.
“Differentials for North Sea, Mediterranean, and West African grades relative to the Brent benchmark have declined to levels last seen in June 2014,” before the oil price downturn,” Mahesh said. “In our view, this is signaling that further upward momentum in Brent prices is likely to fade.”
The natural gas contract for June delivery was up nearly 15¢ to a rounded $2.88/MMbtu. The Henry Hub, La., gas price was $2.77/MMbtu, down 1¢.
Heating oil for June fell 0.8¢ to a rounded $1.95/gal on May 8. The price for reformulated gasoline stock for oxygenates blending for June increased a fraction of a penny to remain at a rounded $1.99/gal.
The June ICE contract for Brent crude was down 15¢ to $65.39/bbl, while the July contract was down 7¢ to $66.16/bbl. The ICE gas oil contract for June was down $9.75 to $595/tonne.
The average price for the OPEC’s basket of 12 benchmark crudes for May 8 was $62.44/bbl, down $1.54.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.