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Crude futures fall to five-year lows despite Libyan oil port fire

Highlights

Crude futures settled at five-year lows Monday, as the market brushed aside continued fires at Libya's largest oil terminal, as persistent oversupply concerns led the oil complex lower.

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NYMEX February crude closed down $1.12 at $53.61/b. ICE February Brent settled $1.57 lower at $57.88/b.

Both settlements represented lows not seen for front-month contracts since May 2009.

In refined products activity, NYMEX January ULSD futures settled 5.88 cents softer at $1.8491/gal. NYMEX January RBOB ended the session 5.59 cents lower at $1.4528/gal.


Three crude storage tanks at the Es Sider terminal remained on fire Monday following attacks December 25 by Islamist militias trying to take control of Libya's largest oil export terminal.

Exports from Es Sider and the nearby Ras Lanuf terminal were suspended December 17 due to clashes in the area involving militias.

Libya's oil ministry said last week the country's crude output had fallen to 200,000 b/d, down from 1 million b/d at the end of October.

The focus on the fires provided a "minor fundamental support hook" to petroleum prices early Monday, Citi Futures and OTC Clearing analyst Tim Evans said in a note.

"Lower Libyan output does make it more likely that OPEC's overall production will be at or even somewhat below the 30.0 [million b/d] official quota, but a first-half 2015 supply/demand surplus may still be on the order of 1.5 [million b/d]," Evans said.

However, crude futures were unable to hold onto those early gains. NYMEX February crude sank as low as $52.90/b, while ICE February Brent fell to an intraday low of $57.37/b.

Toward the market's close, crude futures received support from a report showing a weekly drop in the US oil rig count, Prices Futures Group analyst Phil Flynn said.

"Prices looked like they were headed for a free fall toward $50/b until the Baker Hughes report came out, and that helped slow the downward momentum," he said.

For the week that ended December 26, the number of operational US oil rigs fell 37 to 1,499, Baker Hughes said.

Analysts and traders are keeping a close eye on the number of idled rigs for signs the fall in oil prices is having an impact on drilling.

DALLAS FED SURVEY

The Dallas Federal Reserve said Monday in its monthly manufacturing survey for Texas that the index for general business activity fell to 4.1 in December, down from 10.5 in November.

A score above 0 indicates expansion, but the December reading was below market expectations.

Dennis Gartman, publisher of the Gartman Letter, said the analysts' consensus was in the 9-10 range, and a score below 8 would be "disconcerting."

"The survey clearly shows the selloff in crude is having an impact on manufacturing in and around Texas, especially when it comes to manufacturers of oil rigs, pipes and drilling muds," he said.

The Dallas Fed's December survey could prove to be precursor to slowing crude production, Gartman said.

WEST AFRICAN SUPPLY GLUT

The global oversupply is also being felt in West Africa, with Angolan and Nigerian crude struggling to sell, trading sources said Monday.

Of 54 Angolan cargoes offered in February, just over 20 had been heard to trade, and some January cargoes were being reoffered to the market.

In the Nigerian market, approximately 20 million January barrels are still available along with almost the entire February program.

The abundance of spot crude available from West Africa could be a boon for US Atlantic Coast refiners. Cracking margins on the USAC for Nigerian Bonny Light are around $10.32/b on a 30-day moving average, compared with just $5.36/b for North Dakota Bakken, or $5.75/b for Canadian Hibernia.

US imports of Nigerian crude held steady at 136,000 b/d for the second straight week last week, the latest weekly US Energy Information Administration oil data shows. Imports from the country had flatlined at zero for five consecutive weeks between October and November.

--Geoffrey Craig, geoffrey.craig@platts.com
--James Bambino, james.bambino@platts.com
--Eklavya Gupte, eklavya.gupte@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com