Crude Oil Prices Plummet as Iraqi Exports Expected to Resume

Strategic Insights -

Crude oil prices plunged on both sides of the Atlantic on Monday as word spread that Iraqi crude oil exports were likely to resume soon. The drop in prices was triggered by the expected approval of the humanitarian oil sale plan, which would allow Iraqi oil to flow into the global market. The sharp decline in prices was exacerbated by the return of financial funds to the market, which embarked on a selling spree, leading to the setting off of several sell-stops. The resulting settlement prices were the lowest in 23 months in New York and 22 months in London.

Key Takeaways:

  • Crude oil prices fell to a 23-month low in New York and a 22-month low in London on Monday.
  • Iraqi crude oil exports are expected to resume soon, pending approval of the humanitarian oil sale plan.
  • Trading volumes on the New York Mercantile Exchange (Nymex) increased significantly on Monday, with financial funds leading the selling spree.
  • February Nymex light, sweet crude futures settled at $17.62/bbl, down 58 cents, and February IPE Brent futures hit a record low of $16.56/bbl.
  • Asian refiners are cutting back on crude oil purchases due to the region's financial woes, leading to an expected surge in crude oil availability in the European and U.S. markets.
  • A cargo of Indonesian Tapis was recently heard on offer in the Gulf of Mexico, a blend that "clearly shouldn't be there," according to a Gulf Coast broker.
  • January Nymex gasoline took a big hit, dropping by as much as 1.81 cents during the session, while January heating oil was more resilient, ending the day down 0.95 cents.
  • Natural gas prices rose on both cash and futures markets, with spot market prices on the Gulf Coast jumping about 8 cents at the Henry Hub in Louisiana.

Statistics:

  • February Nymex light, sweet crude futures settled at $17.62/bbl, down 58 cents from the previous day's close.
  • February IPE Brent futures hit a record low of $16.56/bbl, down 73 cents from the previous day's close.
  • Asian refiners are cutting back on crude oil purchases, with a 10% reduction in purchases expected in the first quarter of the year.
  • The humanitarian oil sale plan is expected to be approved by U.N. Secretary-General Kofi Annan by the end of the week.

Sources:

  • "Crude falls to 23-month low" by TOD (published 1997-12-22)
  • "Indonesian Tapis offered in Gulf of Mexico" by a Gulf Coast broker (published 1997-12-22)