Oil's Rally Above $50 Ends
Oil prices fell last week, with US futures ending the week under the important $US50 a barrel level for the first time for several weeks.
Thanks to the advent of the 4th hurricane of the season, oil prices fell Friday in the US as the gulf coast awaited the arrival of a storm named Nate.
By yesterday Nate had closed 92% of Gulf of Mexico oil production and 77% of gas output. That’s 1.61 million barrels per day of oil and 2.48 billion cubic feet per day of natural gas, the US Bureau of Safety and Environmental Enforcement said. Oil industry executives told Reuters that Nate has had a bigger impact on Gulf production than the persistent Harvey did five weeks ago.
Production from some platforms should resume late Sunday or Monday though. The Gulf of Mexico is home to about 17% of daily US crude output and 5% of natural gas output.
Oil prices could jump in Asian trading today until the market sees production returning to normal.
Many energy companies have evacuated offshore oil and gas platforms, prompting a slowdown of oil production around Louisiana, but traders are also weighing the likelihood that OPEC-led production cuts will be extended through past March next year as Russia and the Saudis seem to suggest at a meeting last week.
November West Texas Intermediate crude fell $1.50, or 3%, to settle at $US49.29 a barrel in New York for a loss of about 4.6% for the week.
It was the lowest finish since mid-September and the loss followed gains in each of the last four weeks.
In London December Brent crude futures fell $US1.38, or 2.4%, to $US55.62 for a loss of about 2.1% for the week.
The US Energy Information Administration (EIA) reported Wednesday that American oil production hit 9.56 million barrels a day (bpd) in the week ended September. 29, its highest level since July 2015, while exports were nearly 2 million barrels a day - an all time record.
The EIA also reported that crude stocks fell by 6 million barrels to around 465 million barrels (which remains high for this time of year, the EIA said), which was supportive of prices, indicating the market was moving closer to balancing as global stocks drain.
US crude exports rose to 1.98 million bpd in the last week of September, surpassing the 1.5 million bpd record set the previous week.
The jump in US exports has in part been driven by a recent widening between prices for US West Texas Intermediate crude and Brent futures.
Brent last week hit its highest premium over WTI in two years, making US crude increasingly competitive in foreign markets. Exports will fall if that premium narrows from more than $US5 a barrel to around $US3.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.