MARKET WATCH: NYMEX February crude prices climb despite inventory gain

The light, sweet crude oil contract for February delivery gained more than $1.40/bbl on the New York market Jan. 11. Analysts said evidence of supply cuts by major producers offset a stronger-than-expected climb in US oil inventories.

US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased 4.1 million bbl for the week ended Jan. 6 from the previous week, said the Energy Information Administration’s report (OGJ Online, Jan. 11, 2016).

The latest estimated total was 483.1 million bbl, putting US crude inventories at the upper limit of the average range for this time of year, EIA said. US crude stockpiles ended 2016 with a 7.1 million-bbl drop.

BMI Research said its own calculations indicate a positive initial compliance to the production-cut agreement by members of the Organization of Petroleum Exporting Countries and some non-OPEC producers. Current compliance appears to be about 73%, BMI Research said.

“However, we note the Gulf Cooperation Council countries that have reportedly enacted the bulk of the production cuts are currently in the lowest domestic demand period of the year,” BMI Research said, which suggests that production could increase with increased demand.

Kuwait and Oman earlier this month said they had cut production. Falah Alamri, general director of the State Oil Marketing Co. in Baghdad, told the Wall Street Journal that Iraq has cut crude oil production by more than 150,000 b/d from October. Some analysts doubt Iraq will cut by 210,000 b/d as it has agreed.

Saudi Arabia has reduced oil production to less than 10 million b/d, which is below its targeted level, Saudi Arabia Energy Minister Khalid Al-Falih told participants at an energy conference in Abu Dhabi. He said Saudi will consider renewing its pledge to cut crude output in 6 months.

The Weekly Petroleum Status Report said US oil producers added 176,000 b/d for a total of 8.946 million b/d for the week ended Jan. 6, marking the highest US production level since mid-April 2016. The Lower 48 contributed a weekly gain of 190,000 b/d, which was offset by a 14,000-b/d decline in Alaska.

Energy prices

The February crude oil contract on the New York Mercantile Exchange increased $1.43 on Jan. 11 to close at $52.25/bbl. The March contract gained $1.36 to $53.06/bbl.

The NYMEX natural gas price for February delivery dropped 5¢ to $3.22/MMbtu. The Henry Hub spot gas price closed at $3.28/MMbtu, up 7¢.

Heating oil for February climbed 4¢ on Jan. 11 to a rounded $1.65/gal. Reformulated gasoline stock for oxygenate blending for February also gained 4¢ to a rounded $1.59/gal.

The Brent crude contract for March on London’s ICE was up $1.46 to $55.10/bbl. The April contract increased $1.34 to $55.60/bbl. Gas oil for January closed Jan. 11 at $487/tonne, up $4.25.

The average price for OPEC’s basket of benchmark crudes for Jan. 11 was $50.98/bbl, down 48¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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