OIL PRICES DOWN $33.75
Light, sweet crude prices for February delivery settled Jan. 7 below $34/bbl on the New York market, which was the lowest settlement for the front-month contract since February 2004. Brent crude oil for February also settled below $34/bbl on the London market Jan. 7.
The prices for other types of crude also fell. Western Canadian Select, the benchmark for heavy crude from the Canadian oil sands, traded about $14/bbl below the New York oil futures benchmark Jan. 7.
The basket of 13 types of crude sold by members of the Organization of the Petroleum Exporting Countries fell to $29.71/bbl Jan. 6 and $27.85 Jan. 7.
Analysts blamed Chinese stock market volatility and a faster-than-expected weakening of the Chinese yuan for contributing to dropping oil prices worldwide. China is one of the world's largest oil consumers.
The Asian giant's central bank, the People's Bank of China, fixed the value of the yuan against the dollar on Jan. 7 after yuan values dropped 0.5% from Jan. 6, marking the biggest move since Aug. 13, when a devaluation of the yuan weakened the currency.
A weaker yuan could mean fewer Chinese crude oil imports. Oil traders noted investors already were nervous about China's economy because trading on Chinese stock markets was halted early 2 days this week.
Volatility triggered a circuit breaker mechanism, which Chinese regulators said has been suspended.
Martin O'Rouke of Saxo Bank said, "The [circuit breaker] decision is indicative of Beijing's inability to get to grips with market dynamics. Manipulating an economy is one thing—trying to manage markets is altogether another."
US natural gas futures prices jumped 11¢ to a rounded $2.38/MMbtu on Jan. 7 after the weekly government gas storage estimated that gas levels in underground storage across the Lower 48 fell more than analysts had expected.
The Energy Information Administration estimated levels at 3.643 tcf as of Jan. 1, which was a net decline of 113 bcf from the previous week. Stocks were 535 bcf higher than last year at this time and 464 bcf above the 5-year average of 3.179 tcf, the Gas Storage Report said.
Analysts and traders surveyed by The Wall Street Journal before the report's release had anticipated a 100-bcf withdrawal.
Typically, gas storage experiences withdrawals in early winter upon more gas demand for heating, but mild temperatures in recent months meant inventories were building until late November.
The February crude oil contract on the New York Mercantile Exchange dropped 70¢ to settle Jan. 7 at $33.27/bbl. The March contract was down 71¢ to settle at $34.49/bbl.
The NYMEX natural gas contract for February rose 11¢ to a rounded $2.38/MMbtu. The Henry Hub gas price held steady at $2.35/MMbtu for a second consecutive day Jan. 7.
Heating oil for February delivery dropped 1.5¢ to a rounded $1.07/gal. The price for reformulated gasoline stock for oxygenates blending for February was down 1.6¢ to a rounded $1.15/gal.
The February ICE contract for Brent crude dropped 48¢ to $33.75/bbl, and the March contract was down 54¢ to $34.09. The ICE gas oil contract was $316/tonne on Jan. 7, up $1.25.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 benchmark crudes for Jan. 8 was $27.85, down $1.86.
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