MARKET WATCH: NYMEX oil prices rally, closing above $48.50/bbl

Light, sweet crude oil prices for November delivery rallied by more than $2/bbl on the New York market Oct. 6 to settle above $48.50/bbl while Brent crude oil prices also rose more than $2/bbl on the London market to settle at a 4-week high of nearly $52/bbl for November delivery.

Mark Papa, former chief executive officer of EOG Resources and now a partner at Riverstone Holdings LLC investment firm, told an Oil and Money conference in London on Oct. 6 that he expects a “dramatic” decline in US production growth.

“We are about to see a pretty dramatic decline in US production growth,” Papa said. He forecast US oil production will stall in October and begin to decline from early next year. Constrained bank financing for shale development will be the main hurdle, he said.

Papa told Reuters that he sees the US as a long-term growth producer. If light, sweet crude prices went back to $75/bbl on the New York market, he forecast US oil production would resume growth at about 500,000 b/d. That would be about half the record growth rates experienced in recent years.

Meanwhile, the weekly Petroleum Status Report showed another gain in crude and product supplies.

The Energy Information Administration estimated US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased 3.1 million bbl for the week ended Oct. 2 from the previous week to a total of 461 million bbl.

Gasoline inventories increase

Total motor gasoline inventories increased 1.9 million bbl, which EIA called above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week.

Distillate fuel inventories decreased by 2.5 million bbl last week but are in the middle of the average range for this time of year. Propane-propylene inventories rose 1.6 million bbl for the week ended Oct. 2, which EIA said was well above the upper limit of the average range.

US refinery inputs averaged about 15.6 million b/d, which was down 403,000 b/d from the previous week’s average. Refineries operated at 87.5% of capacity for the week ended Oct. 2.

Gasoline production decreased, averaging 9.3 million b/d. Distillate fuel production increased last week, averaging 5.1 million b/d.

US imports averaged 7.1 million b/d, down 486,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged more than 7.2 million b/d, 3.3% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 543,000 b/d, and distillate fuel imports averaged 111,000 b/d.

Energy prices

The November crude oil contract on the New York Mercantile Exchange shot up $2.27 to $48.53/bbl on Oct. 6, and the December crude oil contract also gained $2.27 to $49.02/bbl.

The natural gas contract for November rose 2¢ to a rounded $2.47/MMbtu. The Henry Hub, La., gas price climbed 3¢ to $2.35/MMbtu.

Heating oil for November delivery climbed 6¢ to rounded $1.61/gal. The price for reformulated gasoline stock for oxygenates blending for November was up 5¢ to a rounded $1.44/gal.

The November ICE contract for Brent crude rose $2.67 to $51.92/bbl, and the December contract increased $2.58 to settle at $52.45/bbl. ICE gas oil for November settled at $490.25/tonne, up $12.75.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was $46.08/bbl on Oct. 6, which was up $1.13 from a revised Oct. 5 price of $44.95/bbl. OPEC officials revised the basket prices for Oct. 1-5.

Contact Paula Dittrick at

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

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