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Tuesday, March 17, 2015

Crude settles at lowest levels in six years

Investors remained fixated on a supply glut 


Prices for the U.S. crude-oil benchmark marked their lowest settlement in six years on Monday, 17 March 2015 at Nymex as investors remained fixated on a supply glut. Prices took a hit despite a report by the Organization of the Petroleum Exporting Countries that forecast a drop in U.S. output by the end of the year. 

On the New York Mercantile Exchange, April crude settled at $43.88 a barrel, down 96 cents, or 2.1%, after tapping a low under $43. 

The U.S. dollar index saw a corrective pullback on Monday after hitting a 12-year high last week. Meantime, the Euro currency was firmer on a short-covering bounce after hitting a 12-year low in early dealings Monday. 

Oil prices were lower and touched a fresh six-year low to start the trading week, as an already glutted world oil market faces the prospect of Iranian oil exports re-entering the world supply equation. Western nations and Iran are presently meeting and trying to agree on a deal that would lift Western sanctions against Iranian oil. However, many believe the complete lifting of the sanctions is still not likely any time soon. The weaker oil prices on Monday were a bearish factor that worked against the entire raw commodity sector. 

Traders and investors are awaiting this week's meeting of the U.S. Federal Reserve's Open Market Committee (FOMC), which begins Tuesday and ends early Wednesday afternoon. The market place is wondering about the timing of the FOMC raising interest rates, with some reckoning a hike could come as early as June and others wondering if a rate increase will even occur this year. Many look for the Fed to take the word “patient” out of its statement, regarding when to decide to raise interest rates. The FOMC will also release its latest economic projections Wednesday, and Fed Chair Janet Yellen will hold a press conference after the FOMC meeting. 

OPEC, in its monthly market report, said that U.S. oil production could start to fall by the end of the year. For now, however, traders appear focused on data that show production continues to grow despite Nymex oil futures dropping by more than half from their mid-2014 peak above $107 a barrel. 

Among other energy products on Monday, prices for petroleum products took their cue from the steep decline in crude. Nymex April gasoline fell 3.4 cents, or 1.9%, to $1.729 a gallon, while April heating oil settled at $1.699 a gallon, down 1.4 cents or 0.8%. 

April natural gas fell 1.1 cents, or 0.4%, to $2.716 per million British thermal units. 
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