OIL PRICES: ABOUT $55
OGJ - Light, sweet crude oil prices dropped back below $48/bbl on the New York market Mar. 23 while Brent crude settled below $51/bbl in London for a third consecutive day.
Analysts said the market is waiting to see whether the Organization of Petroleum Exporting Countries decides to extend its production-cut targets when it meets in May. An extension likely would stabilize and strengthen oil prices.
Earlier this year, US oil prices traded in a range of $50-54/bbl, but prices dropped below that range on concerns about growing crude inventories and higher rig counts. Ample world oil supplies continue to exist after OPEC and some other major producers started production cuts in January.
"OPEC has used up most of its arsenal of verbal weapons to support the market," said Ole Hansen, Saxo Bank head of commodity strategy, adding that full compliance by all producers who agreed to production cuts "is the only tool they have left and on that account they are struggling."
Jefferies issued a research note saying, "OPEC's market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience."
Barclays Commodities Research said its analysts still believe oil prices could rise to $60/bbl in the second quarter assuming inventory draws and the OPEC production cut remains in place.
"However, this would likely be temporary, and we forecast prices in the mid $50s/bbl in the second half 2017," Barclays said.
Goldman Sachs warned another price downturn could come within 3 years because more oil supply will be coming from projects planned and sanctioned years ago.
Analysts with Goldman noted that 2017-19 is "likely to see the largest increase in megaprojects production in history, as the record 2011-13 capex commitment yields fruit." They said, "This long lead-time wave of projects and a short-cycle revival, led by US shales, could create a material oversupply in 2018-19."
The crude oil contract for May delivery on the New York Mercantile Exchange dropped 34¢ on Mar. 23 to $47.70/bbl while the June contract fell 32¢ to $48.26/bbl.
The natural gas price for April rose 4¢ to a rounded $3.05/MMbtu. The Henry Hub cash gas price closed at $2.98/MMbtu, up 5¢.
Heating oil for April fell by less than 1¢ to a rounded $1.49/gal. Reformulated gasoline stock for oxygenate blending for April fell 1¢ to a rounded $1.59/gal.
The Brent crude contract for May on London's ICE decreased 8¢ to $50.56/bbl. The June contract dropped 21¢ to $50.66/bbl. The gas oil contract settled at $450.25/tonne on Mar. 23, up $3.25.
The average price for OPEC's basket of benchmark crudes on Mar. 24 was $48.35/bbl, up 7¢.
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