US light, sweet crude oil prices fell following a government report indicating robust oil and product supplies. The front-month crude price on the New York market closed at $44.45/bbl on Jan. 28, the lowest settlement since Mar. 11, 2009, when the settlement was $42.33/bbl.
Andy Lebow, senior vice-president at Jefferies LLC, said, “There’s nothing positive. You have a glass that’s already full or about full, and the liquids just keep coming.”
The US Energy Information Administration reported oil supplies rose 8.9 million bbl for the week ended Jan. 23 to 406.7 million bbl.
CIBC World Markets said recent inventory gains marked the largest 2-week increase in nearly 30 years.
Ole Hansen, SaxoBank head of commodity research, said oil prices likely are skewed to the downside for the near-term future.
“West Texas Intermediate crude nevertheless managed to find support” to stay above $44/bbl, “which is an indication of some underlying demand despite the weak fundamentals,” said Hansen. “Available supply in the spot market is still too high.”
But Patricia Mohr, Scotiabank’s vice-president of economics in Toronto, said a moderate recovery in oil is likely later this year. She expects international supply and demand conditions will move back toward a balance during the second half of the year.
“A supply-side adjustment is already getting under way (specifically in the US shales), she wrote in a Jan. 29 research note.
The US rig count has been dropping and producers have been announced 2015 budget cuts.
Mohr said Scotiabank petroleum reservoir engineers estimate a sustained 30% drop in drilling activity is needed to level out US oil production from the Bakken, Eagle Ford, and Permian basin plays.
The NYMEX gas contract for February was down 11.5¢ to a rounded $2.87/MMbtu. Meanwhile, the cash gas price at Henry Hub, La., dropped by 6¢ to $2.89/MMbtu on Jan. 28.
Heating oil for February declined by 3¢ to a rounded $1.63/gal. Reformulated gasoline stock for oxygenate blending for February was down less than a penny to a rounded $1.34/gal.
The March ICE contract for Brent crude oil dropped $1.13 to settle at $48.47/bbl. The April contract was down $1.15 to $49.59/bbl. The ICE gas oil contract for February rose by $3.25 to $478.50/tonne.
The average price for OPEC’s basket of 12 benchmark crudes on Jan. 28 was $44.08/bbl, up 84¢ from the previous day.
Contact Paula Dittrick at firstname.lastname@example.org.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.