MW: Oil futures slip, market struggles to sustain rebound
Crude-oil futures slipped back into negative territory in Asian trade Tuesday, reversing from an overnight rebound, as markets struggled to find a floor for oil prices after the recent selloff.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF5, -0.75% traded at $68.51 a barrel, down $0.49 in the Globex electronic session. January Brent crude LCOF5, -0.45% on London’s ICE Futures exchange fell $0.45 to $72.09 a barrel.
Commodity and financial markets are still reeling from the recent plunge in oil prices, which have lost around 35% of their value since June this year. Investors are bracing for spending cuts by global oil majors as they adjust to a new low-price environment.
Oil prices have touched fresh five-year lows since last week after the Organization of the Petroleum Exporting countries decided to leave its oil output unchanged.
OPEC has ceded no ground to competitors, including American shale, but the group will be bruised as well as many of its member countries face prices below break-even budgets with oil at around $70 a barrel, Dan K. Eberhart, chief executive of U.S. oil field services company Canary LLC said.
However, U.S. drillers can expand oil production in the face of falling oil prices as they have become more efficient at coaxing energy from tight rocks, Mr. Eberhart said at the OSEA 2014 energy conference in Singapore.
“In an amazing feat of engineering and economics, lift costs have been driven down as much as $30 per barrel since 2012,” he said. Lift cost is the cost of bringing oil to the surface from its source.
Meanwhile, market analysts are cutting their oil price forecasts in the aftermath of OPEC’s meeting last week.
Societe Generale slashed its oil price forecast for Brent crude by $20 a barrel for 2015 and 2016, and expects the global benchmark to average $70 a barrel in the next two years. It also cut its Nymex WTI crude forecast by $17 in 2015 and $16 in 2016, to average $65 in both years.
“We estimate the costs for most U.S. shale oil at $65 WTI, if not lower. In recent days, after last week’s OPEC meeting, crude prices have already approached those levels, and we expect them to stay there for an extended period of two years,” Michael Wittner, head of oil research at Societe Generale, said.
Nymex reformulated gasoline blendstock for January RBF5, -0.60% --the benchmark gasoline contract--fell 109 points to $1.8701 a gallon, while January diesel traded at $2.2034, 89.99999 points lower.
ICE gasoil for December changed hands at $649.25 a metric ton, up $2.50 from Monday’s settlement.
