Commodity Corner: Oil Plunges on GDP Report

- Commodity Corner: Oil Plunges on GDP Report

Friday, July 29, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for September delivery lost nearly 2.4 percent Friday after the U.S. Department of Commerce estimated that the real gross domestic product (GDP) grew at an annual rate of only 1.3 percent in the second quarter of this year.

The WTI settled at $95.70 a barrel Friday, down $2.31 from the previous day, after the latest figures from the Commerce Department's Bureau of Economic Analysis (BEA) revealed disappointing real GDP figures for the first half of the year. Real GDP is the monetary value of goods and services produced by labor and property in the United States.

The 1.3 percent figure for the second quarter, an advance estimate, failed to meet private-sector expectations of 1.8 percent, the Commerce Department stated. In addition, the BEA revised its first quarter real GDP figure downward from 1.9 percent to a paltry 0.4 percent.

"Today's first look at GDP in the second quarter confirms what we already knew: The economy isn't growing as fast as it needs to," Commerce Secretary Gary Locke said in a written statement. Locke also implied that the economic situation might improve if Congress and the Administration agree on a plan to increase the national debt by authorizing the federal government to raise its borrowing limit from the current $14.3 trillion. "And every day that we fail to act to lift the debt ceiling and inch closer to default, we threaten our economic progress and job creation," he warned.

Brent futures fell less dramatically Friday, ending the day 0.5 percent lower at $116.74 a barrel after fluctuating from $115.80 to $117.06. The WTI peaked at $97.39 and bottomed out at $94.95.

As of 4 p.m. Central Daylight Time Friday, the center of Tropical Storm Don was approaching the South Texas coast. The storm caused offshore operators to shut in approximately 6.2 percent of current natural gas production in the Gulf of Mexico, according to the Bureau of Ocean Energy Management. However, operators were already sending workers back to offshore installations as early as Friday morning.

Given the minimal impact of the storm offshore, along with an Energy Information Administration report that the country's natural gas inventories grew at a larger-than-expected rate last week, natural gas lost 2.2 percent Friday. The September contract price settled at $4.145 per thousand cubic feet.

Natural gas traded within a range from $4.14 to $4.23.

Gasoline for August delivery settled at $3.11 a gallon, down a penny from Thursday. The intraday range for gasoline spanned from $3.07 to $3.12.

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Platts: OPEC Production Plunges in March

Platts: OPEC Production Plunges in March

Tuesday, April 12, 2011
Platts

The 12-member Organization of the Petroleum Exporting Countries' (OPEC) crude oil production output plunged by 630,000 barrels per day (b/d) in March to average 29.17 million b/d, according to a just-released Platts survey of OPEC and oil industry officials and analysts. Higher volumes from several member states failed to cover the loss of 930,000 b/d of Libyan supply, the survey showed.

Excluding Iraq, which does not participate in OPEC output agreements, production from the 11 members bound by notional quotas (OPEC-11) fell by 580,000 b/d to 26.52 million b/d in March from 27.1 million b/d in February.

Libyan production, which had already fallen to 1.39 million b/d from 1.58 million b/d in February, was estimated to have averaged around 460,000 b/d over March.

"Even the simple counting of barrels shows how difficult it will be for the market to recover from the loss of so much Libyan crude," said John Kingston, Platts global director of news. "Beyond that, the quality of the crude coming out of Libya is one of the highest in the world, with very good yields on the transportation fuels, particularly diesel, which the world needs. So one barrel of crude from another OPEC country doesn't neatly replace one barrel of Libyan crude. The market will need to see a decline in demand to balance, and we are seeing signs of that reaction to higher prices ongoing."

OPEC kingpin Saudi Arabia pumped an average 9 million b/d, a 300,000 b/d boost from February levels. With the kingdom claiming 12.5 million b/d of capacity, this leaves Saudi Arabia with some 3.5 million b/d of spare capacity.

The United Arab Emirates (UAE) also increased production, by 100,000 b/d to an estimated 2.5 million b/d, while Kuwait boosted output by 70,000 b/d to 2.4 million b/d, the survey found.

Angolaramped up production to 1.7 million b/d from 1.65 million b/d in February.

But production fell in Nigeria, due in part to maintenance at the Bonga field, with the country's total volumes declining to 2 million b/d from 2.16 million b/d in February.

Venezuelan output fell by 20,000 b/d to 2.21 million b/d. Iraqi production fell by 50,000 b/d to 2.65 million b/d from 2.7 million b/d in February.

Iranian production was steady. However, industry sources said Iran was holding significant volumes of floating storage because of marketing difficulties. It was not clear whether this was crude only or a mix of crude, condensates and fuel oil. One industry source said 15 VLCCs (very large crude carriers) were being used.

OPEC has a notional output target of 24.845 million b/d for the 11 members bound by quotas. The latest estimates of OPEC-11 output show that, as a result of the plunge in Libyan supply, the volume of overproduction has been reduced to 1.675 million b/d.