Light, sweet crude oil prices for November delivery traded at $50/bbl briefly Oct. 9, but settled below that level to close out the week with a slight gain while Brent crude oil futures on the London market dropped modestly.
Barclays issued a research note saying its analysts see limited fundamental support for recent oil price gains.
“We have always believed that prices in the low-to-mid $40s was an inherently unstable equilibrium for US shale supply to help meet incremental demand in 2016 and 2017,” said Barclay’s Miswin Mahesh.
“We think that prices are likely to remain capped to the upside for the remainder of this quarter,” given weakening product demand, burgeoning crude and product stocks, and limited supply adjustments,” Mahesh said.
He noted confirmation of a planned maintenance outage at Buzzard oil field off Britain, starting in early November. Nexen UK Petroleum, which operates Buzzard, confirmed the November turnaround but did not give specifics.
Separately, Statoil reported some oil was observed in the North Sea at a loading buoy at Statfjord field. Loading operations to a tanker were stopped although production at Statfjord A continued operating normally, Statoil said in an Oct. 8 news release, adding it was too early to say how much oil had leaked.
John Saucer, Mobius Rick Group vice-president of research and analysis, said US producers are using the New York futures market to lock in prices for future production, which then pushes prices back down. Companies have cut costs and improved efficiencies, allowing some producers to keep growing production despite low oil and gas prices.
Producers have “lowered their expectations in terms of what sort of return is acceptable,” Saucer told the Wall Street Journal. “If you can lock in a good internal rate of return on a property or an asset or some acquisition at the low $50s, this is a great opportunity for you.”
Meanwhile, the US rig count slide continued, said statistics from Baker Hughes Inc., which reported the rig count dropped 14 units for the week ended Oct. 9 to 795, remaining at its lowest level since May 3, 2002 (OGJ Online, Oct. 9, 2015).
The count has now fallen in 7 consecutive weeks. Regarding monthly statistics, BHI reported the average US rig count for September was 848, down 35 from August and down 1,082 from September 2014.
Since September, Brent has hovered at a range of about $3/bbl over light, sweet crude oil. The closing spread on Oct. 9 was a $3.02/bbl premium for Brent.
The November crude oil contract on the New York Mercantile Exchange closed up 20¢ to $49.63/bbl on Oct. 9, and the December crude oil contract gained 14¢ to $50.14/bbl.
The natural gas contract for November edged up less than a penny to remain at a rounded $2.50/MMbtu. The Henry Hub, La., gas price dropped 8¢ to $2.36/MMbtu.
Heating oil for November delivery was down 1¢ to rounded $1.59/gal. The price for reformulated gasoline stock for oxygenates blending for November was up by nearly a penny to a rounded $1.421/gal.
The November ICE contract for Brent crude decreased 40¢ to $52.65/bbl, and the December contract dropped 47¢ to settle at $52.91/bbl. ICE gas oil for November settled at $486.50/tonne, up 25¢.
The average price for the OPEC basket of 12 benchmark crudes was $48.80/bbl on Oct. 9, up 70¢.
Contact Paula Dittrick at email@example.com.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.