Year: 2015

Last week oil prices remained in the month-old trading range of around $45 a barrel in New York and $48 in London despite several major geopolitical developments and much news affecting oil’s fundamentals. However, the general situation of too much oil production and slowing economic growth remained intact. During the week, Russia announced that its production hit a new post-Soviet high of 10.74 million b/d, and along with the Saudis, Moscow shows no indication of being willing to cut oil production. US production is now down about 500,000 b/d from the high set in June, but this still seems inadequate to ease the oil glut. US oil stocks have climbed in eight of the last ten Octobers due to refinery maintenance, and there is no reason to believe that this will not happen again this year.

Oil prices closed out the week about in the middle of the range where they have traded for the past month — $45.70 in New York and $48.60 in London. During September, prices bounced a dollar or two on news suggesting that demand for oil could increase or production might decline. Conversely, news suggesting that demand might sink or production might increase sent prices back down about the same amount. It appears we could be stuck in this trading range until there are better indications that the oil glut is shrinking; or more definitive news about the course of the global economy – particularly China’s; or there is some major geopolitical upheaval.

After some intra-week volatility, New York oil prices were unchanged for the week closing at $44.68. Brent, however, suffered a 3.2 percent weekly loss closing at $47.47. Much of the week’s oil-price action came on Friday after the US Federal Reserve announced on Thursday it was postponing any increase in interest rates. While such an announcement would normally support oil prices by lowering the value of the dollar, the oil markets jumped to the conclusion that the US economy must be in worse condition than is apparent and fell 5 percent in sympathy with the equity markets. A third weekly drop in the rig count did little to stem the tide as traders are getting use to the idea that small changes in the oil-rig count no longer have much impact on production.

Oil traded in a narrow range last week between $44 and $46 per barrel in New York and $48 to $50 a barrel in London. Increases mostly came from news suggesting that better economic times might be ahead in some part of the world, while declines came when concerns about high inventory numbers, oversupply, and the outlook for China took precedence. US natural gas futures have cycled steadily between $2.73 per million BTUs and $2.64 for over a month now with little news to drive prices out of their trading range.

The three day, nearly 30 percent, price surge which began the week before last continued through last Monday, then slowed as the week progressed with New York crude closing Friday up 1.8 percent and Brent down by 0.9 percent. New York futures settled on Friday at $46.05 and London at $49.61.

It was one of the wildest weeks for the oil markets in recent years. On Monday, another plunge in the Chinese stock markets sent New York oil futures below $38 a barrel and London down to $43, a six and one half year low. The markets bounced around on Tuesday and Wednesday and then surged upwards for two days on the news that the US’s GDP was doing better than previously thought and that the Chinese situation was stabilizing. By Friday afternoon New York futures were up 12 percent for the week, the largest one-week gain since February 2009, closing at $45.22 a barrel. London’s Brent gained 10 percent during the week, closing at $50.05.

The great oil price slide of 2014-15 is taking on epic proportions. US futures traded for a while below $40 a barrel on Friday while Brent closed out at $45.46. Last week the financial press struggled to find an historical comparison to what is taking place in the oil markets. Some papers finally settled on the price crash of 1986 which sent oil prices down to $10 a barrel and led to the demise of the Soviet Union as the most apt. The now familiar forces of too much oil in inventories with nobody moving to cut production; China’s exports, manufacturing, yuan, and stock markets continuing to drop with still more problems in sight; and the prospect for increased Iranian exports after the nuclear agreement is ratified; all contributed to the falling prices. Many sense a decisive shift in the oil markets overall appraisal of the situation with those expecting a price rebound at any minute throwing in the towel and acknowledging that those not expecting a substantial price increase until late 2016 or even 2017 are probably right.

Oil prices have now had a 7th consecutive weekly loss with New York futures closing Friday at $42.50 and London at $49.19. Last week Beijing’s devaluation of the yuan joined the 2 million b/d oil glut and an unplanned outage at a major US refinery to send oil prices lower. Traders now are talking about prices falling into the $30s. The week’s new data included: US crude stocks falling a bit, but not as much as expected; new forecasts from the IEA and EIA which predict that the glut will continue and US production will fall until late in 2016 at which time production and oil prices will rise; the monthly report from North Dakota saying that shale oil production continued to rise in June and that its well-head prices are now down to $28 a barrel; and that the US rig count was up slightly the week before last.

Oil prices continue to fall with New York futures closing Friday at $43.87 and London at $48.61, both down 7 percent for the week. There was the now usual mid-week bounce as traders anticipated that US crude inventories would decline. This time they did fall for the third straight week, but record refining simply turned the crude into inventories of oil products leaving the total stockpiles of commercial crude oil and products largely unchanged at the time of year when it usually drops due to heavier summer demand.

Last week started with the China’s stock markets suffering the biggest one-day loss in eight years. After that it was mostly down hill for the oil markets. There was a bounce after the Wednesday stocks report showed a larger-than-expected, 4.2 million barrel, drop in the US crude inventory, but by the end of the week prices were falling again. At the close Friday New York futures were down to $47.12, the lowest close since March 20th, and London was down to $52.26. The week’s losses left US oil futures down 21 percent during July and Brent down 18 percent, the largest one-month losses since last December. The price drop in July was the largest since the 2008 financial crisis.

The slide in oil prices continued with New York futures closing Friday at $48.14, down 6 percent for the week, and London futures closing at 54.42, down 4.3 percent during the week. This time the decline was aided by an increase of 21 rigs drilling for oil in the US suggesting that US shale oil production will increase or at least decline more slowly. The decision to reactivate these rigs was likely taken a month or more ago when prices seemed to be stabilized around $60 a barrel. In addition to the increase in rigs, the now normal factors of a stronger US dollar, a contracting Chinese economy, increasing inventories, and higher oil output from Saudi Arabia and Iraq contributed to the falling prices. The prospect that more Iranian oil will be coming on the the market before the end of the year also keeps pressure on the market.

While still volatile, oil prices continued to decline last week with New York futures closing at nearly a three-month low of $50.89 – down 3.5 percent for the week and 14 percent this month. In London oil futures followed a similar pattern with Brent also finishing at close to a three-month low of 57.10 – down 3.2 percent for the week and 10 percent this month. This was the third consecutive weekly loss for oil futures.