MARKET WATCH: NYMEX oil prices dip below $40/bbl on Aug. 21

Crude oil prices for October delivery touched a low of $39.86 on the New York market Aug. 21 before bouncing back to settle above $40/bbl, and the contract recorded a decline of 87¢ for the day compared with the previous trading session.

The NYMEX crude oil low marked the first time it had slipped below $40/bbl since 2009. Meanwhile, the Brent crude oil for October lost more than $1/bbl on the London market Aug. 21.

The below-$40/bbl NYMEX trading low followed the release of the weekly rig count from Baker Hughes Inc. showing the US oil-directed rig count rose for the fifth straight week for the week ended Aug. 21. (OGJ Online, Aug. 21, 2015).

US unconventional oil production has dropped slower than many expected during the price downturn that started last year.

Meanwhile, Barclays analyst issued an Oil Market Outlook on Aug. 21 saying they expect slow implementation now that the US Department of Commerce has permitted limited Mexican crude oil swap contracts (OGJ Online, Aug. 14, 2015).

“Crude oil swaps with Mexico are dependent on economics, logistics, and the willingness to alter crude feedstocks,” said Warren Russell of Barclays in New York.

“The economics of swaps remain unclear, but lower US oil production could narrow US oil discounts, reducing the relative benefits to Mexico’s refining sector,” Russell said. “Most of the infrastructure appears to be in place to handle imports, but questions remain. Testing and altering Pemex’s refinery crude slate will take time, and thus any positive response to this news in near-term US differentials is premature, in our view.”

Energy prices

The October crude oil contract on the New York Mercantile Exchange settled down 87¢ on Aug. 21 to $40.45/bbl. The November contract closed down 90¢ to $41.19/bbl.

The natural gas contract for September was down nearly 8¢ to a rounded $2.68/MMbtu. The Henry Hub, La., gas price fell 1¢ to $2.70/MMbtu.

Heating oil for September delivery dropped 3.3¢ to a rounded $1.46/gal. The price for reformulated gasoline stock for oxygenates blending for September was up 1¢ to a rounded $1.54/gal.

The October ICE contract for Brent crude dropped $1.16 to $45.46/bbl, and the November contract declined $1.15 to $46.20/bbl. The ICE gas oil contract for September dropped $18 to $442.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined on Aug. 21 to $43, down $1.13.

Contact Paula Dittrick at

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

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