Oil prices remained below the $40 level but eked out a small gain during a holiday-shortened week.
Traders came back from the Labor Day holiday and sent crude prices down $3 a barrel or 7 percent amid a shaky outlook for oil demand.
West Texas Intermediate on the New York Mercantile Exchange added 3 cents Friday to close at $37.33 a barrel, up from $36.76 at Tuesday’s close. Prices managed to maintain some of Wednesday’s $1.29 jump, losing just 75 cents Thursday. The posted price ended the week at $33.75 a barrel.
Natural gas prices also fell victim to Tuesday’s price drop, sinking 19 cents to $2.4 per Mcf, and lost another 14 cents as the week drew to a close. Prices lost 5 cents Friday to close at $2.27 per Mcf.
“It’s hard for me to see oil prices getting out of the $40s for about two years,” David Bledsoe, president of Henry Resources, told the Reporter-Telegram by email. “When the world has 8 million barrels – mainly from OPEC – off the market, it seems impossible for oil prices to improve until demand recovers and all of the excess capacity is taken.”
Bledsoe said any recent strength in natural gas prices was little noticed by his company. He explained that gas revenues make such a small part of the company’s revenues, and most of Henry’s gas is sold at Waha pricing of $1.50 per Mcf rather than Henry Hub pricing of $2.50 per Mcf. Additionally, he said, most of the revenues from the company’s gas stream comes from natural gas liquids, which are ratioed to oil prices.
Leslie Beyer, president of the Petroleum Equipment and Services Association, told the Reporter-Telegram by email that oil price stabilization “is a positive sign of economic recovery. It means people are returning to work and helps companies restart production to fuel that recovery. It’s also important to acknowledge the uncertainty underlying the economic recovery as we work toward containing the pandemic, but demand for the safe and efficient production of oil and gas will definitely return.”
While futures in New York edged up on Friday, tracking a move higher in U.S. equities, prices are still set for a nearly 7 percent decline this week, Bloomberg reported, saying traders have been turning their attention to data showing the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption, Bloomberg said. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July. A retreat in global equities has also weighed on energy markets.
Meanwhile, Bloomberg reported, the physical market for actual barrels of crude is showing some signs of strength. This week, WTI Midland crude’s premium over NYMEX oil futures touched its highest level since mid-July, and the premium for Heavy Louisiana Sweet crude is at its strongest in over a week.
Read it from MRT – Photo as posted on MRT (Elizabeth Conley/Staff Photographer)
