MARKET WATCH: NYMEX crude oil prices dip to lowest level since 2009

The front-month light, sweet crude oil contract settled just above $43/bbl on the New York market Aug. 11, touching a 6-year low. China’s central bank devalued its currency, prompting steep declines in oil prices. Brent crude oil prices on the London market settled below $50/bbl on Aug. 11.

It has proven to be a volatile week for the crude oil market, analysts agreed, noting the Aug. 11 dip erased an Aug. 10 price gain for US and Brent futures. China’s currency decision triggered concerns by investors about a possible slowing of Chinese demand for ample oil supplies.

“Commodities recovered a bit on Monday only to be struck down in flames on Tuesday when the People’s Bank of China announced its new fixing mechanism, which essentially opens the door for a continued devaluation,” said Ole Hansen, head of commodity strategy for Saxo Capital Markets.

The yuan experienced its biggest single-day drop in 20 years following the central bank’s decision. The devaluation makes China’s imports of crude more expensive because oil trades in dollars.

The International Energy Agency said Aug. 12 that the world’s crude oil oversupply is likely to continue because global production “continues to grow at a breakneck pace.” Meanwhile, IEA also sees growing oil demand.

IEA revised its 2015 global oil demand to 1.6 million b/d, up 200,000 b/d from its earlier forecast, and the Paris-based group forecast 2016 global oil demand would rise by 1.4 million b/d.

Separately on Aug. 12, the Energy Information Administration estimated US commercial crude oil supplies for the week ended Aug. 7, excluding those in the Strategic Petroleum Reserve, decreased by 1.7 million bbl from the previous week. The latest total was 453.6 million bbl, the weekly Petroleum Status Report said.

The drop was anticipated although it was smaller than expected. Analysts surveyed in advance of the weekly report’s release had told the Wall Street Journal that they expected crude oil inventories to fall by 2.1 million bbl.

Gasoline inventories decline

Total US motor gasoline inventories decreased by 1.3 million bbl last week, which EIA called the middle of the average range. Both finished gasoline inventories and blending components inventories decreased for the week ended Aug. 7.

Distillate fuel inventories increased by 3 million bbl, which EIA called the middle of the average range for this time of year. Propane-propylene inventories rose 2.4 million bbl last week, and levels were well above the upper limit of the average range, EIA said.

US refinery inputs averaged more than 17 million b/d during the week ended Aug. 7, which was 46,000 b/d less than the previous week’s average. Refineries operated at 96.1% of capacity last week. Gasoline production increased slightly last week, averaging 10 million b/d. Distillate fuel production increased last week, averaging over 5.1 million b/d.

US crude oil imports averaged about 7.6 million b/d for the week ended Aug. 7, up by 393,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged about 7.6 million b/d, which was 1.1% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 683,000 b/d. Distillate fuel imports averaged 118,000 b/d last week, EIA said.

Energy prices

The September crude oil contract on the New York Mercantile Exchange plunged $1.88 on Aug. 11 to settle at $43.08/bbl. The October contract was down $1.79 to $43.87/bbl.

The natural gas contract for September was up less than a penny to remain at a rounded $2.84/MMbtu. The Henry Hub, La., gas price declined 1¢ to $2.84/MMbtu.

Heating oil for September delivery climbed nearly 3¢ to a rounded $1.56/gal. The price for reformulated gasoline stock for oxygenates blending for September dropped less than a penny to a rounded $1.69/gal.

The September ICE contract for Brent crude declined $1.23 to $49.18/bbl on Aug. 11. The October contract was down $1.31 to $49.71/bbl. The ICE gas oil contract for September dropped $10.25 to $471.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for Aug. 11 was $47.66, up 34¢.

Contact Paula Dittrick at [email protected].

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.