MARKET WATCH

Oil marks lowest settlement since 2003

 

Published: Feb 11, 2016 3:14 p.m. ET
By Myra P. Saefong / MARKETS/COMMODITES REPORTER & Biman Mukherji


Oil futures fell again on Thursday, with West Texas Intermediate crude marking its
lowest settlement in nearly 13 years, as traders concluded that last week’s modest fall
in U.S. crude supplies wasn’t enough to outweigh pressure from a global supply glut
and worries about weaker oil demand.


March WTI crude US:CLH6 fell by $1.24, or 4.5%, to settle at $26.21 a barrel on the
New York Mercantile Exchange after touching a low of $26.05. That was the lowest
settlement since May 6, 2003, according to FactSet. Prices have now fallen for six
sessions in a row.


April Brent crude UK:LCOJ6 on London’s ICE Futures exchange lost 78 cents, or 2.5%,
to $30.06 a barrel.


The U.S. Energy Information Administration on Wednesday reported that crude
inventories fell by around 800,000 barrels for the week ended Feb. 5, which marked the
first weekly decline in five weeks.


But “the market took the view...that the decline in U.S. crude-oil stockpiles would be
temporary and this kept downward pressure on prices overnight,” said an ANZ Bank
report.


The International Energy Agency and the EIA said this week they expect such
oversupply to persist for months, keeping prices low. The Organization of the Petroleum
Exporting Countries earlier Wednesday cut its forecasts for global oil-demand growth,
citing lower consumer appetite in places such as Russia and Brazil despite low prices.
“While everyone is busy talking about how low oil prices are, we’ve seen very little
evidence of production cuts from the U.S. or elsewhere,” said Robbie Fraser,
commodity analyst at Schneider Electric.


“To make matters worse, the ongoing volatility in global markets is a clear indication that
emerging-market growth in oil demand won’t be as reliable as it has been in recent
years,” he said. Most stock markets around the globe took a hit on Thursday.In the U.S.,
the Dow Jones Industrial Average DJIA, -0.38% sank, in part, due to the tumbling oil
prices.


For oil, “everyone says we’re nearing a bottom, yet that isn’t really what the
supply/demand picture is indicating right now,” said Fraser.


Theoretically, a coordinated cut by the Organization of the Petroleum Exporting
Countries is “exactly what this market needs to begin a climb higher,” he said.


Late Thursday, The Wall Street Journal reported that the United Arab Emirates energy
minister said that current prices have already forced non-OPEC producers to at least
cap output increases. The news helped WTI prices pare some losses in electronic
trading to move back above $27.


But coordinated OPEC cuts aren’t likely to happen anytime soon. “Until Saudi Arabia
shows a willingness to join in on production cuts, comments from non-OPEC Russia
and other OPEC members are “largely meaningless,” Fraser said earlier Thursday.


Dollar weakness that followed dovish remarks by U.S. Federal Reserve Chairwoman
Janet Yellen regarding the outlook for interest rate increases also failed to support oil
prices.


Natural-gas futures also moved lower Thursday after the EIA reported a weekly supply
fall of 70 billion cubic feet. That was less than the decline of between 81 billion and 85
billion cubic feet expected by analysts polled by Platts.


March natural gas US:NGH16 settled down 5.2 cents, or 2.5%, at $1.994 per million
British thermal units.


Meanwhile, petroleum-product prices were little changed, with March gasoline
US:RBH6 down less than 0.1% at 94.17 a gallon and March heating
oil US:HOH6 adding 0.4% to 97.91 cents a gallon.


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND
MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES
MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY
RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT
IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE
RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL
DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES.