MARKET WATCH: Supply fears push energy prices higher

Sam Fletcher
Senior Writer

HOUSTON, July 11 -- The front-month crude futures contract jumped more than $5/bbl on July 10 in New York, recovering most of its $9/bbl loss during the first two trading sessions this week, as Iran test fired more rockets.

A flurry of trading hiked the contract's price by $4/bbl in the last 30 min of the open session, said Olivier Jakob at Petromatrix, Zug, Switzerland.

Energy futures prices were still climbing in early trading July 11. "The oil market once again has its eyes set on new record highs as well as the $150/bbl mark," said analysts at Pritchard Capital Partners LLC, New Orleans. "Concerns regarding supplies from Iran and Nigeria were cited, but mostly the gains appear to be a bigger money flow into oil, some short-covering ahead of the weekend, and technical strength." They reported, "Refined product futures are also moving solidly higher with heating oil once again seeing the stronger gains."

On July 9, Iran test-fired nine medium- and long-range missiles in the Persian Gulf, demonstrating that it is equipped to retaliate against attacks by Israel or the US. It fired more missiles July 10 apparently in response to a warning from Secretary of State Condoleezza Rice that the US will defend Israel and other allies if attacked. However, the Organization of Petroleum Exporting Countries also warned that it cannot replace the crude shortfall if Iran is attacked and its production and exports are disrupted.

"Iran has been trying to do as good a public relations exercise as Israel and its 'Glorious Spartan' military exercise early in June," Jakob said. "Israel has been telling the world that maybe it has the logistical capacity of hitting Iran, and Iran has been telling the world that maybe it has the capacity to hit Israel." He noted that discussions continue over a prenegotiation freeze period on the nuclear issue. "If it was not for the missile test, then any advance in the negotiations would have looked like Iran was giving in due to the Israeli threat," said Jakob.

Meanwhile, photography experts said one photo of four Iranian missiles being fired was faked. There is speculation that Iran doctored the photo to cover up its failure to launch one of the missiles in that group.

A statement by the Movement for the Emancipation of Niger Delta that its 2-week ceasefire will end July 12 also helped boost energy prices. Rebels indicated they would resume attacks because of the recent promise by US officials to back the Nigerian government in the conflict that has already shut in a quarter of Nigeria's oil production in the last 2 years. In the interim, security forces said gunmen kidnapped employees of a German construction firm in Port Harcourt, Nigeria, on July 11. The abductees work for Julius Berger Nigeria PLC, a unit of Bilfinger Berger AG, Germany's second-largest builder.

In other news, an oil workers' union in Brazil is threatening a 5-day strike against Petroleo Brasileiro SA, effective July 14, that would shut down oil fields in the Campos basin that produce more than 80% of Brazil's crude. At issue is a 10-year quest by workers for Petrobras to count the day that crews leave the 42 offshore platforms as a working day.

Adam Sieminski, chief energy economist, Deutsche Bank, Washington, said, "Falling oil demand in the US and Europe is offsetting strength in China. But the continuing impact of economic gains in the other non-OECD Asian countries as well as the Middle East, and the 'rest of the world,' mean that oil demand remains strong." He said, "On the tropical storm front, the very warm Atlantic and a decreasing wind-shear environment suggest an active African storm track, but landfalls, for now, seem more likely centered on the Carolinas than the Gulf of Mexico."

Energy prices
The August contract for benchmark US light, sweet crudes escalated by $5.60 to $141.65/bbl July 10 on the New York Mercantile Exchange. The September contract jumped $5.61 to $142.33/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $5.60 to $141.66/bbl. Heating oil for August delivery rose 18.58¢ to $4.04/gal on NYMEX. The August contract for reformulated blend stock for oxygenate blending (RBOB) gained 13.01¢ to $3.51/gal.

The August contract for natural gas advanced 29.4¢ to $12.30/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 34¢ to $11.78/MMbtu.

The earlier loss of $1.57/MMbtu through the first three NYMEX sessions this week "had some traders a little shell-shocked," said Pritchard Capital analysts. "A New York floor trader said the market had completely 'blown through' all the support levels he had been tracking, and compounding the losses was the fact that there hadn't been any commensurate weakness in crude oil."

In London, the August IPE contract for North Sea Brent crude increased $5.45 to $142.03/bbl. Gas oil for July remained unchanged at $1,235.50/tonne.

The average price for OPEC's basket of 13 reference crudes gained 52¢ to $133.68/bbl on July 10.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

US Forest Service takes no stance on fracturing in national forest

12/12/2014

The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Frac ban exemption made in Broomfield

12/12/2014 A Colorado District Court judge has ruled that a hydraulic fracturing ban in Broomfield, Colo., does not apply to an operator that entered into an ...

OSHA seeks to limit silica exposure for oil workers, Proposed rules target frac sand mining, fracturing

12/12/2014 The rapid growth in oil and gas production from shale and tight oil formations in the US is generating a boom in a related industry: frac sand. San...

Study links methane contamination in water wells to poor well construction-not fracing-in Marcellus

12/12/2014 A new study found that fugitive gas contamination at eight clusters of water wells in the Marcellus and Barnett shale regions might be linked to we...

Weak crude prices could threaten Bakken production growth

12/12/2014 Bakken shale production set another record in August, but weakening crude prices and flaring reduction efforts threatened to temper production grow...

Husky reports start of steam operations at Sunrise oil sands project

12/12/2014

Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

White Papers

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Available Webcasts



The Future of US Refining

When Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

When Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST



On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


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