Oil Prices Plummet as Nymex Crude Futures Set 21-Year Record

Strategic Insights -

Oil prices experienced a significant dip on Tuesday, with Nymex crude futures breaching the $45 per barrel mark for the first time in 21 years. The futures contract reached a record level in early trading, but later eased due to news that Iraq was set to resume oil exports from its southern oilfields. The decline in prices was also attributed to a US government prediction that gasoline and oil prices would soften in the short-term.

Key Takeaways:

  • Nymex crude futures reached a record level of $45 per barrel for the first time in 21 years, but later eased to $44.52/bbl.
  • The decline in prices was also attributed to news that Iraq was set to resume oil exports from its southern oilfields.
  • The US government predicted that gasoline and oil prices would soften in the short-term, leading to bearish sentiment in the market.
  • The Energy Information Administration (EIA) stated that some reduction in prices is likely if increased production continues to flow and inventories build.
  • The EIA also noted that current world oil prices may not entirely reflect pure economic fundamentals of the world oil supply market due to threats of disruption in oil-producing countries.
  • Opec's reference basket price passed $40/bbl for the first time since it was introduced in 1986, and Venezuelan energy minister said that Opec could increase production capacity in six months.
  • Opec's target range of $22-$28/bbl established in 2000 was exceeded by the reference basket price, which rose to $40.04/bbl on Monday.

Statistics:

  • Nymex crude futures fell 32 cents to $44.52/bbl.
  • Brent crude lost 28 cents to $41.27/bbl.
  • The EIA predicted that gasoline and oil prices would soften in the short-term leading to bearish sentiment.
  • Opec's reference basket price exceeded $40/bbl for the first time since 1986, reaching $40.04/bbl on Monday.
  • Opec's target range of $22-$28/bbl established in 2000 was exceeded by the reference basket price.

Sources:

  • "Oil prices fall to 21-year low as Nymex crude breaches $45 per barrel" (Oil Daily, August 10, p.1)
  • "US energy secretary predicts short-term softening of gas prices" (Oil Daily, August 10, p.2)
  • Short-Term Energy Outlook (Energy Information Administration)
  • Interview with Rick Mueller, analyst with Energy Security Analysis (published in Oil Daily)
  • Statement by Venezuelan energy minister on Opec's production capacity (published in Oil Daily)