MARKET WATCH: NYMEX crude oil for December drops below $49/bbl

Crude oil prices dropped just over $1/bbl on the New York market Oct. 28 for both December and January contracts pending news about efforts by the Organization of Petroleum Exporting Countries toward achieving its proposed production cut.

Oil prices continued to drop in early Oct. 31 trading. Morgan Stanley issued a note saying recent OPEC discussions with non-OPEC countries yielded no progress.

“OPEC remains at an impasse,” Morgan Stanley said. “Non-OPEC members are also refusing to join until OPEC formalizes an agreement, with several refusing to cut at all.”

Azerbaijan, Brazil, Kazakhstan, Mexico, Oman, and Russia all refused to agree to cut output or freeze production at existing levels until OPEC members reach an agreement.

Barclays issued a Commodities Weekly research note Oct. 30 saying its analysts expect higher oil and natural gas prices in 2017. Barclays forecast, “Supply-side destruction and continued robust demand should tighten the balance compared with 2015 and 2016.”

The 2017 price optimism is irrespective of any OPEC decision during its Nov. 30 meeting in Vienna, Barclays noted.

“We expect prices to rise to the low $50 range in the fourth quarter and average $57[/bbl] (Brent) in 2017. For oil, non-OPEC supply adjustments in 2016 have closed the gap between supply and demand, while the continued tightening in 2017 is more likely to be the result of continued demand growth.”

Barclays also sees 2017 looking “constructive for natural gas balances. New sources of demand and slowing production growth should support natural gas prices. We forecast an annual average of $3.34/MMbtu.”

Energy prices

The December crude oil contract on the New York Mercantile Exchange fell $1.02 on Oct. 28 to close at $48.70/bbl. The January contract was down $1.01 to $49.33/bbl.

The natural gas contract for December climbed nearly 4¢ to a rounded $3.10/MMbtu. On the spot market, the Henry Hub gas price dropped 4¢ to $2.65/MMbtu.

Heating oil for November declined nearly 3¢ to a rounded $1.54/gal. The price for reformulated gasoline stock for oxygenates blending for November dropped 1.8¢ to a rounded $1.47/gal.

The December Brent crude contract on London’s ICE declined by 76¢ to settle at $49.71/bbl. The Brent contract for January was down 92¢ to $50.68/bbl. The November gas oil contract settled at $461.50/tonne, down $3.50.

The average price for OPEC’s basket of benchmark crudes on Oct.28 was $47.04/bbl, down 19¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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