MARKET WATCH: NYMEX, Brent oil prices fall before US inventory report

Light, sweet crude prices for February fell moderately Jan. 5 on markets in New York and London, which analysts attributed to weaker-than-expected Chinese manufacturing statistics and US factory orders.

The crude price for February delivery closed at just under $36/bbl in New York Jan. 5, and prices continued dropping in early trading Jan. 6. Analysts said sluggish economic statistics contributed to lingering concerns about oil demand for crude in an already oversupplied market.

But the Energy Information Administration reported US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, decreased 5.1 million bbl for the week ended Jan. 1 from the previous week. The latest total was 482.3 million bbl, the Petroleum Status Report showed.

Regarding world oil markets, analysts noted tensions between Saudi Arabia and Iran failed to drive oil prices up as some had anticipated. Middle East tensions are seen by traders as meaning there is less chance of agreement on cutting production levels by the Organization of Petroleum Exporting Countries.

Wood Mackenzie Ltd. noted that unless producers such as Russia, Iran, and Iraq agree to reduce their oil production, Saudi Arabia will not cut its production to support oil prices.

“The current ramping up in tensions between Saudi Arabia and Iran only further confirms our view that Saudi Arabia is unlikely to cut its output to help Iran regain market share,” WoodMac’s Macro Oils service said. WoodMac forecast continued global oversupply in this year’s first half.

“We expect a global drawdown in stocks to begin in second-half 2016 and accelerate in the fourth quarter. With this tightening in the supply and demand balance, political risk will become more important to oil prices,” WoodMac said.

In early 2016, non-OPEC supply was in a year-on-year decline. WoodMac forecast a 700,000 b/d fall for 2016.

“This contrasts sharply with the start of 2015 when non-OPEC oil supply was rising at what turned out to be a record rate of 1.4 million b/d for the year,” WoodMac said.

US oil supply falls

EIA’s report that US crude oil inventories fell 5.1 million bbl was close to the American Petroleum Institute calculations that oil supply declined 5.6 million bbl for the week ended Jan. 1.

Total motor gasoline inventories increased 10.6 million bbl for the week ended Jan. 1, which the agency described as being in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased.

Distillate fuel inventories increased 6.3 million bbl, which EIA said was near the upper limit of the average range for this time of year. Propane-propylene inventories fell 1.4 million bbl but are well above the upper limit of the average range.

US refinery inputs averaged more than 16.6 million b/d for the week ended Jan. 1, which was 65,000 b/d less than the previous week’s average. Refineries operated at 92.5% of capacity last week.

Gasoline production decreased, averaging 8.8 million b/d. Distillate fuel production increased last week, averaging 5 million b/d.

US crude oil imports averaged more than 7.5 million b/d, down 382,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged 7.8 million b/d, which was 5.9% above the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 602,000 b/d. Distillate fuel imports averaged 164,000 b/d.

Energy prices

The February crude oil contract on the New York Mercantile Exchange dropped 79¢ to settle Jan. 5 at $35.97/bbl. The March contract was down 77¢ to settle at $37.18/bbl.

The NYMEX natural gas contract for February declined less than a penny to remain at a rounded $2.33/MMbtu. The Henry Hub gas price dropped to $2.32/MMbtu on Jan. 5, down 7¢.

Heating oil for February delivery decreased less than a penny to remain at a rounded $1.13/gal. The price for reformulated gasoline stock for oxygenates blending for February was down 3¢ to a rounded $1.26/gal.

The February ICE contract for Brent crude dropped 80¢ to $36.42/bbl, and the March contract was down 71¢ to $36.89/bbl. The ICE gas oil contract for January was $329.25/tonne on Jan. 5, up $1.25.

The average price for OPEC’s basket of 12 benchmark crudes for Jan. 5 was unavailable because OPEC offices were closed Jan. 6.

Contact Paula Dittrick at

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