West Texas Intermediate and Brent crude reversed daily movement to extend a fourth weekly decline after Saudi Arabia indicated it is prepared to boost output, while also pledging, together with the UAE, to keep current production unchanged. Natural gas fell for a third day on forecast for mild weather in the short term.
US crude for delivery in February stood 1.54% lower at $56.25 per barrel at 14:10 GMT, having shifted in a daily range of $58.53-$55.89. The contract surged 5.10% on Friday to $57.13.
Meanwhile on the ICE, Brent for settlement in the same month traded at $60.59 a barrel, down 1.29% on the day. Prices ranged between $62.97 and $60.45. The European benchmark crude rose 3.56% on Friday to $61.38, settling at a premium to WTI of $4.25. The gap widened to $4.34 on Monday.
Todays edition of the Saudi-owned al-Hayat newspaper quoted oil minister Ali Al-Naimi saying that his country is prepared to boost production and gain market share by meeting demands of new customers.
On Sunday, Al-Naimi said that the global supply glut that recently drove oil prices to the lowest in 5-1/2 years was created by the lack of cooperation from non-OPEC producers. The group will probably refrain from cutting output, even if non-member producers offer to pump less, Al-Naimi said, and expressed confidence that oil will rebound as reviving global economic growth will spur demand.
Meanwhile, UAE Energy Minister Suhail Al Mazrouei said yesterday that “irresponsible” production from outside OPEC is behind the fall in prices. “We call on all other producers to stop the increase” he said.
According to Mohammed Al Sada, Qatar’s energy minister, the market suffers from an excess supply of 2 million barrels per day. Oil prices have fallen more than 40% since a June peak amid concerns that a weaker global economy would not induce enough demand to absorb rising supplies.
The market has fallen some 20% after the Organization of the Petroleum Exporting Countries resisted calls to cut its collective output at a November 27 meeting and reaffirmed its previous production quota. This comes at a time of ever-growing US crude output, with the Energy Information Administration having reported that US producers pumped 9.137 million barrels of crude per day in the week ended December 12th, the highest on weekly data started in January 1983.
National Australia Bank expects Brent and WTI to average $68 and $64 per barrel in 2015, respectively. “Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative U.S. supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year” it said.
Natural gas
Natural gas was down ~7% on Monday, extending declines to a third day, on projections of milder weather over the eastern US and the West Coast during the week.
On the New York Mercantile Exchange, natural gas for delivery in January plunged 7.42% to $3.207 per million British thermal units by 14:10 GMT, having shifted in a daily range between $3.351 and $3.170 per mBtu, its lowest since August 8th, 2013. The energy source dropped 4.89% to $3.464 on Friday and settled the week 8.9% lower.
According to NatGasWeather.com, US natural gas demand will be moderate compared to normal over the next seven days.
The eastern US will maintain its mild state early this week, with fewer rains over the region. Meanwhile, a strong weather system will start to form over the central US, paving the way for colder temperatures. Readings may reach lows of 20s and 30s over the northern districts of Texas.
Conditions over the West Coast will also remain quite mild, with projections of high snow levels and heavy rains. The weather system over the central US will move into the eastern US on Christmas Eve with areas of rain, strong winds and snow.
A very cold blast is expected to hit the majority of the central and the eastern US late this week. Freezing temperatures will affect many high natural gas use regions during the first week of January and thus significantly boost heating demand.
All in all, the majority of the US will be affected by lower-than-normal temperatures, excluding the southwest.
Supplies
The Energy Information Administration said last week that US natural gas stockpiles fell by 64 billion cubic feet (bcf) in the seven days through December 12th, exceeding analysts’ projections for a withdrawal of 57-63 bcf but also falling well behind the five-year average drop of 157 bcf.
Total gas held in US storage hubs amounted to 3.295 trillion cubic feet as of December 12th, scoring a 0.2% surplus to last year’s level of 3.289 trillion during the comparable period, but also narrowing its deficit to the five-year average of 3.553 trillion to 7.3%.
Due to last weeks mild weather, this weeks supplies withdrawal is expected to again be much thinner than the five-year average, with projections pointing to a 60-bcf draw, compared to the average of -138 bcf. The deficit to the five-year average is expected to further shrink next week, with early estimates hinting another smaller-than-average inventory decline due to this weeks overall mild weather.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
