June starts with busy market day

Sam Fletcher
Senior Writer

June began with a busy day on oil and gas markets. The July futures crude contract on the New York Mercantile Exchange fell on June 1 for a second session as the US, UK, Germany, France, China, and Russia hammered out a slate of incentives for Iran to give up uranium enrichment for its nuclear power program.

The US government agreed to participate in negotiations to persuade Iran to halt the program, which could produce weapons-grade uranium. That would be the first direct contact between the US and Iranian governments in the 26 years since the US Embassy in Tehran was seized by Islamic revolutionaries. The move prompted "speculation that the situation is now closer to a benign resolution," said Paul Horsnell, Barclays Capital Inc., London. "However, we see the offer as being more of an indication of the narrowing of options and the acceleration of pace in the issue than as a precursor to the breaking of the ice. In order to maintain the existing coalition and to achieve some element of support from China and Russia, the offer was one that was perhaps almost forced. However, unless Iran backs down on enrichment fairly swiftly—and at the moment we consider that unlikely—then this could be seen as another box checked on the list that points towards a military solution."

Ayatollah Ali Khamenei, Iran's supreme leader, threatened a global shortfall of oil if Iran is penalized for its nuclear program. He "specifically referred not only to Iran's own supplies, but also to oil shipments passing through the Persian Gulf through the strategic Strait of Hormuz," said analysts in the Houston office of Raymond James & Associates Inc.

The July contract for benchmark US crudes lost a total of $1.69 over two sessions to close at $70.34/bbl June 1 on NYMEX. But it rebounded to $72.33/bbl June 2 following disruptions at several US refineries and the kidnapping of foreign oil workers in Nigeria, who were released June 4.

Hurricanes
June 1 marked the start of the hurricane season in the North Atlantic and Gulf of Mexico, causing the July natural gas contract to escalate a total of 50¢ May 31-June 2 to a 3-week high of $6.62/MMbtu on NYMEX. "Fresh memories of last year's devastating hurricanes prompted the rally," said analysts at Enerfax Daily. The 2006 hurricane season is expected to be unusually active, although not as bad as the record 2005 season. Weather experts at Colorado State University said the west and central sections of the Gulf of Mexico should be spared the brunt of hurricane activity this year with currents pushing storms toward Florida and the US East Coast.

As of June 1, the US Minerals Management Service still listed 71 platforms as evacuated following Hurricanes Katrina and Rita last year. MMS said 227,888 b/d of crude were still shut in on federal leases in the gulf, 15.2% of the normal daily production from those waters. Officials said 1.1 bcfd of natural gas, 11% of daily production, also were shut in. Production lost Aug. 26-June 1 totaled 162.4 million bbl of crude and 784.5 bcf of gas, 29.7% and 21.5%, respectively, of annual production from federal leases in the gulf.

"Natural gas has moved up steadily for the past 4 days from a sub-$6 to mid-$6 range," said analysts June 5 in the Houston office of Raymond James & Associates Inc. "Though still early to call it a secular up trend, we do feel that gas has shown a resilient floor around $6/MMbtu and allowed E&P companies to generate above-average returns in most operating areas. The increase is likely driven by the marked decrease in noncommercial short contracts."

OPEC
Ministers of the Organization of Petroleum Exporting Countries met in Caracas on June 1. As expected, they voted to maintain the existing production limit of 28 million b/d for the 10 member countries other than Iraq.

In the 2 weeks through May 2, the front-month contract for benchmark US crudes hovered at $70-72/bbl on NYMEX.

"On the upside it has been capped by perceived easier geopolitics following the [US] proposal [to negotiate with Iran] and by producer hedging," said analysts at Petromatrix GMBH, Zug, Switzerland. "On the downside, it has been supported by buyers taking an option on summer disruptions and a weak dollar. We are not yet back to the record highs but getting closer, and our open interest model now suggests a crude market which is underpriced by $2/bbl," based on the June 2 closing price.

(Online June 5, 2006; author's e-mail: samf@ogjonline.com)


Related Articles

Fossil fuel interests, others are fighting alternatives, Obama says

08/25/2015 Fossil fuel interests, conservative think tanks, and groups funded by billionaires Charles and David Koch are fiercely fighting a growing wave of a...

MARKET WATCH: NYMEX oil prices drop down to nearly $38/bbl

08/25/2015 Crude oil prices for October delivery settled at $38.24/bbl on the New York market Aug. 24, down $2.21 from the previous trading session, and Brent...

WoodMac: ‘Decade-long’ global gasoline surplus possible for refiners

08/24/2015 The global oil product market could experience a surplus of gasoline supply as early as 2017, according to the latest long-term oil product market ...

MARKET WATCH: NYMEX oil prices dip below $40/bbl on Aug. 21

08/24/2015 Crude oil prices for October delivery touched a low of $39.86 on the New York market Aug. 21 before bouncing back to settle above $40/bbl, and the ...

Pennsylvania's governor issues crude-by-rail study he commissioned

08/24/2015 Pennsylvania Gov. Tom Wolf (D) issued a study he commissioned in late April of issues stemming from the growing number of crude oil shipments by ra...

API: US petroleum demand up in July

08/21/2015 Total petroleum deliveries, a measure of demand, rose 2.2% from July 2014 to average nearly 19.6 million b/d last month, according to the American ...

MARKET WATCH: NYMEX oil prices edge up, but decline trend continues

08/21/2015 Crude oil prices on the New York market edged above $41/bbl Aug. 20, but started sliding again in early Aug. 21 trading and looked to be on track f...

MARKET WATCH: NYMEX oil prices drops below $41/bbl on higher crude inventory

08/20/2015 Crude oil prices on the New York market dropped more than $1/bbl on both the New York and London markets on Aug. 19, with light, sweet crude oil pr...

BHP Billiton most active in ‘disappointing’ western gulf lease sale

08/19/2015 Just 5 companies submitted 33 bids on 33 tracts in Gulf of Mexico western planning area Lease Sale 246, the US Bureau of Ocean Energy Management (B...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected