Oil prices see new “bottom”
By Gulgiz Dadashova
The crude oil market is evidently keeping a low trend as the oil prices are plummeting to the level of $40 per barrel. The prices reached another “bottom” as Brent for February settlement decreased as much as 68 cents, or 1.3 percent, to $52.43 a barrel on the London-based ICE Futures Europe exchange.
It lost $3.31, or 5.9 percent, to $53.11 on January 5, the lowest since May 1, 2009. The European benchmark crude traded at a premium of $2.96 to WTI on January 6, Bloomberg reported.
West Texas Intermediate crude fell 1 percent today to $49.54, after sinking 5 percent on January 5. Inventories in the U.S., the world’s biggest oil consumer, rose by 750,000 barrels last week, according to a Bloomberg survey of analysts ahead of the government’s data release. The highest U.S. crude output in 30 years is fueling the global glut that drove oil into a bear market last year.
The lowing trend of the past 6-7 seven months is supported not so much by imbalance of demand and supply as by politics, as the energy producers try to clean up alternative producing projects from the global market.
The traditional producers are turning a blind eye to decreasing of oil prices, which may reach even to $20 per barrel, to win total victory over their shale and shelf competitors.
The oil prices decreased almost 50 percent in 2014, the most since the 2008 financial crisis, after the Vienna meeting of the Organization of Petroleum Exporting Countries. Members of the Cartel, providing 40 percent of the world’s oil supply, have resisted calls to cut output to maintain a collective target to compete with U.S. producers.
The market is expected to face “more problems” in 2015 as no one is willing to cut supplies. This is as the situation is quite favorable for oil hungry countries such as China.
Azerbaijani oil
The price of AZERI LT CIF Augusta stood at $53.81 per barrel on January 5, or $3.53 per barrel less compared to the price on January 2. AZERI LT FOB Ceyhan oil price was $52.67 per barrel, or $3.52 per barrel less than the previous price.
Azerbaijan produces three grades of crude oil—the SOCAR-produced barrels, Azeri BTC, and Azeri Light.
Azerbaijan also exports URALS oil from the Novorossiysk port, which is delivered via the Baku-Novorossiysk pipeline. The price of URALS (EX-NOVO) was $47.85 per barrel on Jan. 5, or $3.45 per barrel less than the previous price.
Azerbaijan’s state energy company SOCAR reported that in December 2014 when the cost of a barrel of the main export grade of Azeri BTC FOB Ceyhan oil exceeded the price of standard grade Brent, the trend reached its historical maximum.
The cost of a barrel of oil BTC FOB Ceyhan exceeded the cost of a barrel of Brent by $5.90 in December (maximum of 2014) compared to $0.8 in November, $2.1 in October, $0.99 in September, and $0.5 (historic minimum) in January 2014. In 2014, the best price difference at the level of $2.97 was registered in September and March.
The previous historic minimum was registered in October 2012 at $0.97 and the best index for 2012 - in May ($2.35). An absolute record was recorded in August 2011 at the level of $3.22. In 2010, the peak was achieved in December ($1.51), but then it ceded much to the record difference ($1.97) registered in July 2008 against the backdrop of record high oil prices.
"The cost of a barrel of BTC FOB Ceyhan in December 2014 was $68.43 against $79.7 in November and $113.21 in June (the best level for 2014). At that, the cost of a barrel of Russian oil mixture Urals (REBCO) was $61.53 against $78.92 and $86.63 and $109.44 respectively and the grade Brent $62.53 against $78.9 and $111.65,” SOCAR said.
Proven crude oil reserves of Azerbaijan, one of the world's oldest producing countries, were estimated at 7 billion barrels in January 2014, according to the Oil & Gas Journal. In 2013, Azerbaijan produced 881,000 barrels per day (bbl/d) of petroleum and other liquids, and consumed about 85,000 bbl/d.
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