West Texas Intermediate crude (WTI) fell below US$50/bbl, to $49.93/bbl, on 20 July for the first time since April, despite reports that Saudi Arabian exports have fallen to their lowest in five months.
According to statistics published by the Energy Information Agency (EIA), the price of WTI fell more than 3% this past week and more than 14% in July, while Brent fell nearly 3% last week and more than 10% for the month.
Elsewhere, North Sea Brent crude oil prices averaged $61/bbl in June, a $3/bbl decrease from May. Crude oil prices fell by about $4/bbl on 6 July. The fall was driven by Greece economic troubles, increasing hydrocarbon inventories, concerns about low economic growth in China and the possibility of increased Iranian oil exports.
Generally, monthly Brent crude oil prices have averaged between $55/bbl and $65/bbl per month since falling to $48/bbl in January. While the $55 to $65 price band can be sustainable for producers with legacy assets, new exploration and production activities, especially high-priced offshore undertakings, might continue to be curtailed, at least through the end of the year.
Currently, the EIA forecasts that Brent crude oil prices will average $60/bbl in 2015 and $67/bbl in 2016, while forecasted WTI for 2015 and 2016 average $5/bbl less than the Brent price. The current values of futures and options contracts for December 2015 delivery, according to the EIA’s market prices and uncertainty report and with a 95% confidence interval, suggest the market expects WTI prices in December 2015 could range wildly from $41/bbl to $89/bbl.
According to EIA estimates, total US oil production saw a one-month decline of 50,000 b/d in May. “Production is expected to generally continue falling through early 2016 before growth resumes,” reports the agency. “Projected U.S. crude oil production averages 9.5 MMb/d in 2015 and 9.3 MMb/d in 2016.”
Meanwhile, natural gas working inventories were 2577 Bcf on 26 June, which was 35% higher than a year earlier and 1% higher than the previous five-year average of 2010 through 2014, thus keeping gas prices at continued lows.
“Although inventory injections have been strong most weeks, hot temperatures and high demand from the electric power sector contributed to lower-than-average injections during late June. Nevertheless, working inventories are on pace to end the injection season above the previous five-year average. EIA projects end-of-October stocks will be 3919 Bcf, 121 Bcf (3.2%) more than the five-year average.”
For the week of July 15, gas prices slightly increased at most market locations. The Henry Hub spot price began the week at $2.71/MMBtu last Wednesday and ended the report week up, closing at $2.92/MMBtu.
Image from ExxonMobil.
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