Crude Oil Prices Plummet to Under $17/BBL Amid Fund Sell-Offs

Strategic Insights -

Crude oil futures prices for January 1995 deliveries dropped to under $17/bbl on December 2, 1994, due to decreased demand for crude feedstock and funds liquidating their positions at two automatic sell-off points. The drop in crude prices also led to a decline in reformulated gasoline and heating oil futures contracts. The New York Mercantile Exchange (Nymex) RFG futures contract for January delivery fell by 3.69 cents to 50.61 cents/gallon, while January heating oil futures dropped 1.73 cents to 47.02 cents/gallon.

Key Takeaways:

  • Crude oil futures prices for January 1995 deliveries dropped to under $17/bbl on December 2, 1994, due to decreased demand for crude feedstock and funds liquidating their positions at two automatic sell-off points.
  • The drop in crude prices also led to a decline in reformulated gasoline and heating oil futures contracts, with the New York Mercantile Exchange (Nymex) RFG futures contract for January delivery falling by 3.69 cents to 50.61 cents/gallon.
  • January heating oil futures dropped 1.73 cents to 47.02 cents/gallon, while February RFG fell 3.62 cents to 50.93 cents/gallon and March fell 3.26 cents to 51.87 cents/gallon.
  • Continued expectations of warmer-than-normal weather in many regions of the country also pushed down January heating oil prices.
  • Tighter crude-products spreads led to concern about lower refinery runs and decreased demand for crude feedstock.
  • The unexpected drop in crude futures was mainly the result of funds liquidating their positions at two automatic sell-off points, analysts said.
  • The trans-Atlantic spread between Brent crude futures at the International Petroleum Exchange and Nymex crude was squeezed to 80 cents in the run-up to the December 28 implementation of stricter regulations for oil tankers in U.S. waters.
  • Bearish weather forecasts also nudged natural gas futures south, with January natural gas dropping 1.8 cents to $1.635/MMBtu.

Statistics:

  • Crude oil futures prices for January 1995 deliveries dropped to under $17/bbl.
  • The New York Mercantile Exchange (Nymex) RFG futures contract for January delivery fell by 3.69 cents to 50.61 cents/gallon.
  • January heating oil futures dropped 1.73 cents to 47.02 cents/gallon.
  • February RFG fell 3.62 cents to 50.93 cents/gallon and March fell 3.26 cents to 51.87 cents/gallon.
  • January natural gas dropped 1.8 cents to $1.635/MMBtu.
  • February natural gas fell 1.6 cents to $1.678/MMBtu and March dropped 1.2 cents to $1.685/MMBtu.

Sources:

  • "Futures prices for January 1995 deliveries of crude oil dropped to under $17 /bbl on Dec 2, 1994."
  • WASHINGTON -- "Crude prices crashed through $17/bbl on Friday, plummeting more than 80* after being dragged down by weakness in reformulated gasoline (RFG) and heating oil futures."
  • "The fund sell-offs got triggered at around $17.65 and again around $17.35," said one New York-based trader.
  • "The European trading session displayed 5% within each month across all months (Source)"