MARKET WATCH: NYMEX, Brent crude prices jump by about $1/bbl

Light, sweet crude oil prices for March delivery climbed by more than $1/bbl on Jan. 26 to close at nearly $53.80/bbl while the Brent March contract also rose by more than $1/bbl on the London market to close above $58/bbl.

Ole Hansen, Saxo Bank head of commodity strategy, said the 2016 recovery in commodity prices appears likely to extend into 2017. Oil has gained in recent weeks on efforts by the Organization of Petroleum Exporting Countries and some non-OPEC producers to cut production.

Investors and traders have focused on reports of compliance with production cuts. The Jan. 26 price rally came despite a gain in US oil and product inventories issued earlier this week.

Hansen forecast Brent oil price will end 2017 close to $60/bbl and generally rise during the next few years, ending the decade in the range of $70-80/bbl.

“Many uncertainties remain, however, including the policies of the new US administration, the direction of the US dollar, the path of US interest rates, and the pace of economic growth in China,” Hansen said.  “In general, we believe the energy sector slowly will make its way higher. It will be a bumpy road, even a roller coaster ride, but the energy sector is bound to move higher.”

Barclays issued a Blue Drum research note saying, “The oil price has two puppeteers: OPEC and tight oil.”

US unconventional oil production is expected to rise with higher oil prices. Baker Hughes Inc. already has reported higher US rig counts.

Barclays analysts believe crude inventory draws will keep a floor under oil prices in the first half. It sees Brent averaging $55/bbl for the first quarter and light, sweet crude oil futures averaging $53/bbl for the same period. For 2017, Barclays forecast Brent will average $57/bbl and WTI will average $55/bbl.

Energy prices

The crude oil contract for March delivery on the New York Mercantile Exchange rose $1.03 on Jan. 26 to $53.78/bbl. The April crude oil contract climbed 99¢ to $54.38/bbl.

US natural gas futures for February delivery gained 5¢ to a rounded $3.38/MMbtu. The Henry Hub spot gas price was up 17¢ to $3.42/MMbtu. Gas prices gained after the US Energy Information Administration said gas in underground storage across the Lower 48 was estimated at 2.798 tcf as of Jan. 20, a net decrease of 119 bcf from the previous week.

Gas storage levels were 348 bcf less than last year at this time and 20 bcf below the 5-year average of 2.818 tcf, the Weekly Gas Storage Report said.

Heating oil for February increased nearly 3¢ to a rounded $1.64/gal. Reformulated gasoline stock for oxygenate blending for February gained nearly 2¢ to a rounded $1.54/gal.

The Brent crude contract for March on London’s ICE climbed $1.16 to $58.24/bbl. The April contract rose $1.07 to $56.49/bbl. Gas oil for February closed Jan. 26 at $494/tonne, up $6.25.  

The average price for OPEC’s basket of benchmark crudes on Jan. 26 was $52.91/bbl, up 77¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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