Light, sweet crude oil prices for May delivery dropped more than $1 on Mar. 29 on the New York market to settle above $38/bbl. It was the fifth consecutive session for prices to drop and the longest losing streak since February when prices plunged below $30/bbl.
“The rally has run its course, and I think our next big move is another trip back below $30,” Stephen Schork, editor of the Schork Report, told the Wall Street Journal. The rally started in the second half of February on optimism that major producers would freeze production at January levels.
Major producers are scheduled to discuss that proposal Apr. 17 in Qatar, but Iran already has said it intends to ramp up production and exports. Meanwhile, Kuwait and Saudi Arabia reportedly agreed to restart an offshore oil field that had been down since 2014, but few specific details were available.
Brent oil prices dropped below $40/bbl on the London market on Mar. 29 after news reports about the restart of production from Khafji oil field, which had been closed since October 2014. Kuwait Gulf Oil Co. and Saudi Aramco Gulf Operations Co. jointly operate the 300,000-b/d field. No restart date was given.
Citi analyst Timothy Evans issued a note saying, “Even the idea of a freeze may be tested,” by the Khafji announcement. “Without some clarification to the effect that overall output won’t be increased, even the freeze idea may not hold.”
Iran is expected to add 500,000 b/d within a year from existing oil fields now that international nuclear-related sanctions were lifted in January, International Energy Agency Executive Director Fatih Birol told Reuters news wire on Mar. 30. Birol said it would take time for Iran to develop new fields.
Separately, Federal Reserve Chair Janet Yellen on Mar. 29 said the Fed would act cautiously regarding its earlier plans for a four-step US interest rate hike this year. She cited deteriorating global growth.
Martin O’Rourke, analyst and managing editor at Saxo Bank, said, “Yellen scuppered all talk of a possible rate hike in April overnight and probably put a June move on the backburner too, sparking a rally in Asian equities and torpedoing any hopes the dollar might have had of ending the month on a high note.”
The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other currencies, fell 0.4%. Oil trades in US dollars so a weaker dollar makes oil less expensive for holders of other currencies.
Meanwhile, the US Energy Information Administration was scheduled to release its weekly inventory report on crude oil and products on Mar. 30.
The NYMEX natural gas contract for April rose 5¢ to a rounded $1.90/MMbtu. The Henry Hub gas price was $1.77/MMbtu, up 4¢.
Heating oil for April delivery declined nearly 2.5¢ to $1.15/gal. The price for reformulated gasoline stock for oxygenates blending for April fell 1.4¢ to a rounded $1.45/gal on Mar. 29.
The Brent crude contract for May on London’s ICE declined $1.13 to $39.14/bbl. The June contract was down $1.02 to $39.85/bbl. The ICE gas oil contract for April was $341.50/tonne on Mar. 29, down $10.50.
The average price for the Organization of Petroleum Exporting Countries basket of 12 benchmark crudes was $34.50/bbl on Mar. 29, down 98¢.
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