MARKET WATCH: NYMEX, Brent oil prices falling on world crude oversupply

Light, sweet crude prices for January dropped moderately to settle below $35/bbl on the New York market Dec. 17 upon news reports that Russia had no plans to cooperate with the Organization of Petroleum Exporting Countries to reduce oil supplies available worldwide.

Russian Energy Minister Alexander Novak confirmed that his country was not considering any coordination with OPEC. In the past, Russia had suggested that it might be willing to cut oil production to support crude prices.

“OPEC…doesn’t play the role it used to in the 1970s and 1980s,” Novak told reporters in Vladivostok, Reuters reported Dec. 18. “We are not considering the viability of any kind of coordination.”

Novak said he envisions Brent crude oil prices on the London market at $45-50/bbl during 2016. “This is a normal market price, which should allow everyone to compete with one another,” Novak said. Brent crude for February delivery settled just above $37/bbl on Dec. 17.

Meanwhile, Iran is expected to resume oil exports next year after international sanctions are lifted.

The US also could start sending domestically produced crude oil abroad under legislation being finalized. US lawmakers were expected to authorize the lifting of a 40-year-old on exporting crude oil as part of the omnibus spending agreement. Analysts expect President Barack Obama will sign it.

“Short-term market impacts are limited,” Barclays analyst Michael Cohen of New York said in a research note. He believes US oil production is set to decline during 2016 and also is likely to fall in 2017. Combined with anticipated new processing capacity, that means that a sustained premium for West Texas Intermediate and Light Louisiana Sweet to Brent might emerge next year, Cohen said.

Jason Gammel, an analyst with Jefferies, said a US oil inventory overhang means it could take 2 years to “liquidate enough volume to bring storage back to the [long-term] average.”

His comment came after data provider Genscape Inc. reported that its own proprietary calculations indicate crude supplies at Cushing rose by nearly 1.4 million bbl for the week ended Dec. 15.

Separately, the Energy Information Administration estimated overall US oil supplies gained 4.8 million bbl during the week ended Dec. 11 (OGJ Online, Dec. 16, 2015).

Energy prices

The January crude oil contract on the New York Mercantile Exchange declined 57¢ to settle Dec. 17 at $34.95/bbl. The February contract was down 48¢ to settle at $36.27/bbl.

The NYMEX natural gas contract for January fell 3.5¢ to a rounded $1.75/MMbtu. The Henry Hub gas price also was $1.75/MMbtu on Dec. 17, marking a gain of 7¢ for the spot price.  

Heating oil for January delivery dropped less than a penny to remain at a rounded $1.11/gal. The price for reformulated gasoline stock for oxygenates blending for January was up 2.9¢ to a rounded $1.26/gal.

The February ICE contract for Brent crude dropped 33¢ to $37.06/bbl, and the March contract was down 37¢ to $37.62. The ICE gas oil contract for January was $336/tonne on Dec. 17, down $1.50.

The average price for the OPEC basket of 12 benchmark crudes for Dec. 17 was $31.49, down 79¢ after OPEC revised its basket price for Dec. 16 to $32.28.

Contact Paula Dittrick at

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