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Wednesday, February 11, 2015

Crude plunges more than 5%

Prices drop to lowest settlement level in nearly a week 


Crude-oil futures fell more than 5% to their lowest settlement level in nearly a week on Tuesday, 10 February 2015 at Nymex as concerns about a persistent supply glut resurfaced ahead of weekly U.S. inventory updates. Prices for the U.S. benchmark had tallied a climb of nearly 9% over the past three trading sessions, partly due to expectations that declines in active drilling rigs would help ease the oil supply surplus. 

Light, sweet crude futures for delivery in March on the New York Mercantile Exchange fell $2.84, or 5.4%, to settle at $50.02 a barrel. 

The International Energy Agency, in its medium-term outlook released Tuesday, said it expects Brent to average $55 a barrel in 2015, edging up to $60 in 2016 and hitting $73 by 2020. The group also said that a price recovery seemed “inevitable,” with the oil glut starting to ease as soon as the second half of the year. By comparison, the U.S. Energy Information Administration in a monthly report issued Tuesday forecast an average of $58 for Brent crude and $55 for West Texas Intermediate crude in 2015 — unchanged from the previous report. 

Still, a monthly report on Monday from the Organization of the Petroleum Exporting 
Countries showed a reduction in non-OPEC supply growth estimates as well as a modest boost to the group's world oil consumption forecast for this year. 

Focus of the world market place is still on Greece's new government, which says it is abandoning a good portion of its heretofore agreed upon debt reduction and austerity measures. Those measures were a prerequisite for Greece to get more financing from the European Union. There is a EU and Greek officials meeting set for Wednesday on the matter. Germany is taking a hard line with Greece, saying the country needs to honor its previous obligations. Traders and investors are in a more risk averse mood this week as this situation plays out. There are worries Greece could exit the European Union, which would open the door to other, smaller EU countries doing the same. 

Chinese inflation fell to a five-year low in January, mainly due to falling raw commodity prices led by crude oil, and weaker demand. China's consumer price index was up 0.8% in January, year-on-year. China also injected liquidity into its financial system for the seventh week in a row, in another effort to boost its economy. 

Among other energy products, March gasoline settled at $1.552 a gallon, down 2.6 cents, while March heating oil fell 4 cents to $1.833 a gallon. 

March natural gas was the lone gainer among key energy futures, tacking on 8 cents, or 3.1%, to $2.677 per million British thermal units ahead of a weekly U.S. supply update due on Thursday.
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