OIL PRICES SURGED BY $1
OGJ - Light, sweet crude oil prices on the New York market and Brent crude oil prices on the London market surged by more than $1/bbl on Feb. 1 as traders and analysts shrugged off a big jump in the US oil inventory report.
Market participants apparently focused instead on a decline in US production even as oil inventories rose by more than expected.
US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased 6.5 million bbl for the week ended Jan. 27 from the previous week, the Energy Information Administration reported Feb. 1.
Oil inventories have climbed for four consecutive weeks. The latest inventory total was 494.8 million bbl, putting oil supplies near the upper range for this time of year, EIA said.
EIA estimated US oil production at 8.915 million b/d, down 46,000 b/d for the week. The Lower 48 accounted for a decline of 45,000 b/d while Alaska production was down by 1,000 b/d.
US natural gas prices also jumped. Barclays analyst Nicholas Potter in New York said he sees "upside price potential in the second half as a hot summer presents a bull case for gas."
Barclays increased its 2017 gas price forecast, specifically weighted towards the second half. Analysts now expect the 2017 gas price will average $3.38/MMbtu compared to Barclay's previous forecast of $3.33, which it made in November 2016.
"A repeat of last summer's weather (18% warmer than normal) would result in prices having to rise into the $3.90/MMBtu levels by our estimation," analysts said. For 2018, Barclays forecast gas prices will average $3.11/MMbtu.
"Winter 2017-18 could prove tight, but we see risk to the downside as new production comes online to meet new pipelines post-first quarter," said Potter. "Recent delays in US LNG projects targeting 2018 mean the market could find itself long gas once again."
The New York Mercantile Exchange crude oil contract for March delivery gained $1.07 on Feb. 1 to $53.88/bbl. The April contract was up $1.07 to $54.49/bbl.
US natural gas futures for March delivery jumped 5¢ to a rounded $3.17/MMbtu. Gas spot prices at the Henry Hub in Cushing, Okla., reached $3.12/MMbtu, up 12¢.
Heating oil for March climbed 4¢ to a rounded $1.67/gal. Reformulated gasoline stock for oxygenate blending for March gained nearly 3¢ to a rounded $1.58/gal.
The Brent crude contract for April on London's ICE increased $1.22 to $56.80/bbl. The Brent May contract was up $1.21 to $57.12/bbl. Gas oil for February closed at $498.25/tonne, up $4.50.
The average price for the Organization of Petroleum Exporting Countries' basket of benchmark crudes on Feb. 1 was $52.76/bbl, up 55¢.
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REUTERS - Brent crude futures LCOc1 were down 72 cents at $61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude CLc1 was at $55.12 per barrel, down 58 cents.
BLOOMBERG - Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.
Global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.
Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.