Crude prices fell on markets in New York and London on Jan. 18, which analysts attributed to a strengthening US dollar and also concerns that rising US shale production could offset a production cut by major producers elsewhere.
Oil is traded in dollars so a stronger dollar makes oil more expensive for buyers using other currencies.
Light, sweet crude for February delivery settled down $1.40 to $51.08/bbl on the New York Mercantile Exchange. Options for February contracts expire with the end of Jan. 19 trading. On the London market, the Brent contract for March settled down $1.55 to $53.92/bbl on the London market.
The Monthly Oil Market Report from the Organization of Petroleum Exporting Countries showed a decline in the cartel’s total production to a rounded 33.1 million b/d, down by a rounded 221,000 b/d in December 2016 compared with the previous month.
Last year, OPEC and some non-OPEC members agreed to collectively cut 1.8 million b/d of oil production starting in January. OPEC members agreed to cut 1.2 million b/d. Of the non-OPEC participants, Russia said it will cut 300,000 b/d.
The OPEC basket of crudes jumped nearly 20% in December to $51.67/bbl, ending above $50/bbl for the first time in 18 months. But the basket’s yearly average value for 2016 was $40.76/bbl, marking its lowest in more than 12 years.
The US Energy Information Administration was scheduled to release its crude and product weekly inventory report on Jan. 19, a day later than normal because federal offices were closed Jan. 16 for the Martin Luther King Jr. holiday.
In a separate report earlier this week, EIA forecast unconventional oil production will increase to 4.75 million b/d in February. EIA also revised its January unconventional oil production estimate to 4.71 million b/d from 4.54 million b/d.
Ole Hansen, head of commodity strategy with Saxo Bank, said he sees the US benchmark averaging $50.70/bbl for the short term while he forecast the Brent price at $53.60/bbl for the short term. He said the market is waiting for OPEC’s January production figures, which will be released in February.
The NYMEX crude oil contract for March delivery fell $1.37 to $51.89/bbl. US natural gas futures for February dropped 11¢ to $3.30/MMbtu. The Henry Hub spot gas price closed at $3.25/MMbtu, down 6¢.
Heating oil for February fell nearly 4¢ on Jan. 18 to remain at a rounded $1.61/gal. Reformulated gasoline stock for oxygenate blending for February dropped 5¢ to $1.55/gal.
The Brent crude contract for April on London’s ICE settled on Jan. 18 down $1.53 to $54.41/bbl. Gas oil for February closed Jan. 18 at $485.75/tonne, down $5.
The average price for OPEC’s basket of benchmark crudes for Jan. 18 was $52.22/bbl, down 8¢.
Contact Paula Dittrick at email@example.com.