In early trading Dec. 8 on the London market, Brent briefly dipped below $40/bbl for the first time since February 2009.
Analysts blamed the sliding crude oil prices on concerns about world oversupply of oil. Meanwhile, the value of the dollar rose on expectations that the US Federal Reserve soon could decide to increase US interest rates.
Oil trades in dollars so a strengthening dollar makes oil more expensive for buyers using other currencies.
Sarah Emerson, ESAI Energy Inc. managing director, told Boomberg, “We’re in the midst of the worst. I think we’ll be looking at a very different market in the next few months. Once there’s more evidence that production is falling, prices will start to recover.”
Petromatrix analyst Olivier Jakob said prices are below what he called the “shale band” of $45-65/bbl where US shale oil remains profitable. He forecast that the December average for US light, sweet crude was likely to fall under $45/bbl, discouraging unconventional production.
Crude oil production in January from seven major US shale plays is expected to drop 116,000 b/d to 4.86 million b/d, said the US Energy Information Administration’s latest Drilling Productivity Report (DPR).
The DPR focuses on the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica, which altogether accounted for 95% of US oil production increases and all US natural gas production increases during 2011-13 (OGJ Online, Dec. 7, 2015).
The January crude oil contract on the New York Mercantile Exchange declined $2.32 to settle Dec. 7 at $37.65/bbl, marking the lowest close since February 2009. The February contract was down $2.09 to $39.30/bbl.
The NYMEX natural gas contract for January dropped nearly 12¢ to a rounded $2.07/MMbtu. The Henry Hub gas price was $2.03 on Dec. 7, down 5¢.
Heating oil for January delivery dropped 6¢ to a rounded $1.28/gal. The price for reformulated gasoline stock for oxygenates blending for January was down 6¢ to a rounded $1.21/gal.
The January ICE contract for Brent crude dropped $2.27 to $40.73/bbl, and the February contract was down $2.31 to $41.19/bbl. The ICE gas oil contract for December closed at $373.50/tonne on Dec. 8, down $22.25.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for Dec. 7 was unavailable.
Contact Paula Dittrick at email@example.com.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.