18 December 2015 – Crude oil prices continued their rout on Friday on reports of additional buildup in U.S. crude stockpiles, fueling worries of a worsening global glut that has already affected prices struggling in the multiyear-lows range.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF6, -0.49% fell 46 cents, or 1.3%, to $34.49 a barrel. February Brent crude LCOG6, -0.40% on London’s ICE Futures exchange slid 20 cents, or 0.5%, to 38.86 a barrel.
The losses were a continuation of a Thursday’s slide, when data provider Genscape Inc. said stockpiles at Cushing, Okla., the delivery point for the benchmark U.S. futures contract, rose by nearly 1.4 million barrels in the week that ended Tuesday. Nearly all of that came in the last half of the week, according a person who had reviewed the report.
The Genscape report came one day after the U.S. Energy Department reported a much larger than expected 4.8 million-barrel increase in U.S. crude stockpiles in the week that ended Dec 11.
Prices have faced strong headwinds for months, plunging more than 40% since the start of the year. Analysts forecast more of the same as oil producers, including those in the Organization of the Petroleum Exporting Countries and Russia, continue to pump out at a high pace in a bid to compete for market share.
Industry watchdog International Energy Agency predicts global oil demand will reach 95.3 million barrels in 2015, while total supply will hit 96.9 million barrels.
Warmer-than-usual winter weather this year has dampened demand, widening room for inventories to grow even more.
“The predicted mild U.S. winter will do nothing to encourage the bulls or the gradual rate path of the U.S. economy that will see the U.S. dollar continue to appreciate,” said Stuart Ive, a New Zealand-based manager at OM Financial.
The combination of warmer weather and oversupply seen in crude is also eroding natural gas prices. Price of spot liquefied natural gas for delivery to northeast Asia averaged $7.397 per million British thermal units for January, marking a 26.5% on-year drop, said pricing agency Platts, based on an industry survey.
The agency said with expected additional supplies from Indonesia, Australia and the U.S., prices may stay in backwardation, a market structure in which long-dated prices will be lower than they are now.
“We believe that for natural gas [prices] to increase for this winter, we would need inventories to decrease below 2012 levels,” said Daniel Ang, a Phillip Futures energy analyst.
“Considering the warmer winter, this is going to be difficult to achieve which also means that it is very unlikely for natural gas prices to even increase,” he said.
Nymex reformulated gasoline blendstock for January RBJ6, -0.20% —the benchmark gasoline contract — rose 0.4% to $1.267 a gallon, ICE gasoil for January changed hands at $334.25 a metric ton, down $1.75 from Thursday’s settlement.
*Sara Sjolin & Jenny W. Hsu – MarketWatch