Oil Prices Settle Lower
Crude oil futures started the week on a lackluster note.
West Texas Intermediate (WTI) crude oil for January delivery declined by $1.61 Monday to settle at an even $51 a barrel. During the early-week session, the WTI traded between a low of $50.68 and a high of $52.81.
The February Brent crude oil price also ended the day $1.70 lower, settling just shy of the $60 mark at $59.97 a barrel.
Barani Krishnan, senior analyst with Investing.com, told Rigzone that Monday’s drop in oil prices stems in part from a slump in the equities markets and concerns about the world economy.
“Today’s play in oil is more about equities than crude, with the combination of the rout in tech and pharma stocks along with global growth, trade war and Brexit worries leading to risk aversion across the board,” Krishnan said.
Additionally, Krishnan pointed out that the recent decision by OPEC members and Russia to curb output raises an important question for traders.
“There’s another question which will be asked with greater resonance in the coming days and weeks and that is: are the cuts pledged by OPEC+ enough?” said Krishnan. “On the surface, 1.2 million barrels (per day) is pretty close to what the market was promised. But what the Vienna meeting also appears to have completely ignored is the sheer tsunami of U.S. supply that could come on board if you add another $5 or $10 to crude prices.”
Like the WTI and Brent, reformulated gasoline (RBOB) also declined Monday. The January RBOB contract price shed nearly 7 cents to settle at $1.42 a gallon.
“RBOB is taking its hit from crude as well with the crack, or margin, versus WTI down to just over $15 a barrel now, from highs above $18 when U.S. crude stood at four-year highs in early October,” Krishnan explained. “To the regular guy, the most visible clue of what’s going on would be the pump price of gasoline, which is averaging at just around $2.50 a gallon in the East Coast. That’s down 40 cents a gallon over the past three months and 22 cents in the last three weeks alone.”
Unlike the above energy price benchmarks, Henry Hub natural gas posted a gain Monday. The January Henry Hub price rose by nearly six cents to settle at $4.545.
“On the Henry Hub, there’s persistent talk of liquidity having dried up and that’s keeping natural gas volatile or limiting its rally, like today when the cold snap we’re having could have brought an even higher bid,” said Krishnan. “After the run-up to $4 levels, risk premiums for winter seem to be at the threat of disappearing anytime when temperatures are normal and bordering on warmth, despite the extremely low inventories for natgas versus crude oil right now.”
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