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Thursday, January 29, 2015

Crude plunges close to 4%

Prices drop after a larger-than-expected increase in U.S. crude supplies 


Crude prices registered a big drop in prices on Wednesday, 28 January 2015 at Nymex. Oil futures fell on Wednesday after a larger-than-expected increase in U.S. crude supplies, which kept inventories at their highest level in 80 years. Oil prices have fallen nearly 60% since the summer as the market struggles with a global supply glut and weakening demand. Several investment banks cut their price forecast for crude, with Barclays one of the latest to do so. 

Light, sweet crude for March delivery dropped $1.78, or 3.9%, to $44.45 a barrel on the New York Mercantile Exchange. That was crude's lowest settlement since March 11, 2009.
In the latest weekly inventory report, the U.S. Energy Information Administration said earlier Wednesday U.S. oil supplies rose by 8.9 million barrels in the week ended 23 January 2015. Market had expected an increase around 3.5 million barrels. At 406.7 million barrels, U.S. inventories are at their highest since 1924. 

The report also showed that gasoline inventories dropped by 2.6 million barrels, whereas distillates supplies dropped by 3.9 million barrels. Market had expected gasoline stockpiles up 830,000 barrels, and distillate stockpiles down 580,000 barrels. Refineries operated at 88% of capacity that week, and gasoline production decreased to 9.2 million barrels a day. 

Barclays further cut its outlook for both Brent and Nymex-traded crude, saying it expects WTI to average $42 a barrel in 2015, down from its Dec. 1 forecast of $66. For Brent, the bank now expects to see $44 in 2015, down from $72 predicted earlier. Barclays said it expects Brent and WTI to rise to $60 and $57 a barrel in 2016, respectively. 

The Fed described U.S. economic growth as ‘solid' while categorizing job growth as ‘strong.' The central bank did not spend much time discussing overseas developments, which could help explain some of the selling that developed after the statement was released. 

Furthermore, the FOMC showed little concern over low inflation, saying that while the price level is expected to decline in the near term, a gradual return to 2.0% should follow once the ‘transitory effects of lower energy prices and other factors dissipate.' 

Economic data was limited to the weekly MBA Mortgage Index, which fell 3.2% to follow the prior week's surge of 16.1%. 

Among other energy products, gasoline for February delivery turned lower, off half a penny, or 0.4%, to finish at $1.3450 a gallon on Nymex. February heating oil fell 3 cents, or 1.9%, to end at $1.6318 a gallon on Nymex. 

February natural gas retreated 11.5 cents, or 3.9%, to end at $2.8660 per million British thermal units. That was natural gas's largest one-day drop in a week.
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