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Wednesday, January 14, 2015

Crude slips below $46/barrel

UAE OPEC minister says the cartel will not reduce its collective output 


Crude-oil futures ended under $46 a barrel on Tuesday, 13 January 2015 at Nymex as oil supply estimates and comments from the United Arab Emirates's oil minister about OPEC standing pat on oil production combined to stir oil-glut concerns. Economists and traders have been closely watching the Organization of the Petroleum Exporting Countries to see whether the cartel would budge on their decision to maintain oil production levels at 30 million barrels a year. 

On the New York Mercantile Exchange, light, sweet crude for delivery in February fell 18 cents, or 0.4%, to $45.89 a barrel. That's the lowest settlement for oil since April 20, 2009, and one that extends oil's string of losses to a third straight session. Futures traded as low as $44.20 a barrel. 

Crude oil prices were again lower on Tuesday and fell to a nearly six-year low overnight. A United Arab Emirates OPEC minister reportedly said the cartel will not reduce its collective output. Crude prices fell on that news, with February Nymex crude dropping to $44.20 a barrel. 

The U.S. dollar index was higher and is near last week's 10-year high. While certainly not a positive for the raw commodity sector, the stronger greenback appears to be having less daily impact on raw commodity market prices, including the precious metals. 

In overnight news, a report showed consumer inflation in the U.K. was at a 10-year low in December. The steep drop in crude oil prices is blamed for the U.K. inflation reading coming in at up 0.5% in December from up 1.0% in November, year-on-year. Meantime, Greece reported its consumer price index at minus 2.6% in December, year-on-year. Economic readings in the EU are already hinting at deflation knocking on the door. 

The next major data point coming into focus for traders and investors is the 22 January 2015 meeting of the European Central Bank. The specter of price deflation and rhetoric coming from ECB officials suggest the central bank will soon initiate monetary stimulus in the forming of quantitative easing. 

U.S. economic data out Tuesday included the weekly Johnson Redbook and Goldman Sachs retail sales reports, the monthly Treasury budget statement, a report from the World Bank on world economic prospects, and the NFIB small business index. The Job Openings and Labor Turnover Survey showed that openings increased to 4.972 million from 4.830 million in November. The Treasury Budget for December showed a surplus of $1.90 billion, which followed the prior surplus of $53.20 billion. The consensus expected the surplus to hit $3.00 billion. 

Adding to the oversupply worries, the U.S. Energy Information Administration said Tuesday it doesn't expect the pace of U.S. oil production to let up. U.S. crude output averaged 9.2 million barrels a day in December, it said in a monthly report. U.S. oil production will average 9.3 million barrels a day in 2015 and 9.5 million barrels a day in 2016, the report indicated.
Among other energy products, gasoline for February fell less than 1 cent, or 0.5%, to settle at $1.2685 a gallon on Nymex. February heating oil declined 2 cents, or 1.3%, to $1.6339 on Nymex, the lowest finish since 16 July, 2009. 

Natural gas for February delivery bucked the trend, up nearly 15 cents, or 5.3%, to end at $2.9430 per million British thermal units.

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