MARKET WATCH: Crude climbs above $70/bbl again in New York market

Sam Fletcher
OGJ Senior Writer

HOUSTON, June 26 -- The near-month price for benchmark US crude futures climbed above $70/bbl again in the New York market with confirmation of additional disruption of oil exports from Nigeria and the euro recovering from its earlier losses against the US dollar.

Royal Dutch Shell PLC confirmed militant attacks damaged a pipeline carrying benchmark Bonny crude to the key export terminal in Nigeria. Olivier Jakob at Petromatrix, Zug, Switzerland, earlier reported recent attacks on oil facilities in the delta have likely reduced Nigeria’s current production to 1.3-1.4 million b/d, down from 1.9 million last July and 1.8 million in the first quarter of this year. “The attacks on the pipeline infrastructure are also having an impact on the running of the local refineries, Warri and Port Harcourt are said to be shut, and Kanuda [is reported] running on stocks, which will run out in the next 2 weeks and provide some support to the Atlantic Basin light-end products,” he said (OGJ Online, June 25, 2009).

Jakob said June 26, “We have been writing for the last 10 days that markets were not pricing enough of a risk premium on Nigeria.” He said, “If you are a refiner on the US East Coast running on Nigeria light crude oil, you do not change your slate overnight to Arabian Heavy, and Saudi Arabia will anyway not move [to increase production] before global stocks have been reduced. One way or another, Nigerian disruptions should lead to an acceleration in the reduction of light, sweet crude oil stock, and this provides a risk for an acceleration in the reduction of the futures contango.”

A flatter curve on crude futures prices won’t push oil costs back to $150/bbl, “but it will bring more buying power on any dips as it reduces the holding risk in passive length,” Jakob said. “Crude oil physical premiums are also indicating that the current oil prices are not just financial speculation or a trade on the dollar. Russian Urals [crude] historically trades at a few dollars discount to [North Sea] Brent; in July of last year the spread widened down [by] $6/bbl…. Today Urals is trading almost at par to Brent.”

Jakob is “cautious” in his outlook for the Nigerian government’s offer of amnesty to militants. “There is money involved, hence some militants might go for that; but the ones that lay down their arms only leave the territory and its associated business to the ones that don’t, so we will remain skeptical about the whole deal,” he said. Meanwhile, the rebel Movement for the Emancipation of the Niger Delta made an overnight bomb attack on a wellhead in Shell’s Afremo oil field.

Jakob added, “Crude oil was as well supported [June 25] by a rebound in the gasoline crack that had been recently under severe pressure and was a major catalyst to the flat price correction of last week.” Refinery outages in Nigeria could translate into higher import requirements. “also supported by brief power outages at the Valero and Marathon, Tex., refineries,” Jakob said. “The heat wave continues in the US Gulf Coast. Under the heat, roads are buckling from Texas to Louisiana, and power requirements are very near all time record highs. The heat wave is expected to continue into the weekend, and we will price a premium for the risk of refinery outages under these severe conditions,” he said.

Analysts at Pritchard Capital Partners LLC, New Orleans, reported higher prices for both crude and natural gas in early trading June 26. They too acknowledged the role of strengthening gasoline prices and disruption of Nigerian exports in pushing up crude prices. However, they said, “Of greater interest is Sinopec [Corp.]’s purchase of Addax Petroleum [Corp.] for $7.19 billion. The Addax acquisition will give China’s Sinopec reserves in Iraq’s Kurdistan region and West Africa. In addition to the Addax acquisition, in the past 2 months China has extended $10 billion loans to both Rosneft (Russia’s oil producer) and Petrobras [Brazil’s national oil company]. All three transactions highlight China’s desire to secure national energy security and that for major resource plays outside of the US there is an underlying bid with deep pockets.”

The price of the front-month natural gas futures contract rose June 25 on the New York market in response to the Energy Information Administration’s report of a lower than expected injection of gas in to US underground storage during the week ended June 19, said Pritchard Capital Partners [OGJ Online, June 25, 2009]. “Working gas volumes in storage [are] at an all-time high for June, as inventories already exceed the previous record for the end of the month of 2.615 tcf set in 2006. The high levels of natural gas storage has captured the focus of the market and is one of the leading catalysts to support the bearish case for natural gas, but the storage level should be worked through as production declines begin to impact supplies,” they said.

In Houston, analysts at Raymond James & Associates Inc. said the Waxman-Markey greenhouse gas bill set for House vote June 26 or over the weekend “could be a game changer for the American way of life, not to mention the coal industry.” They said, “The sweeping energy bill calls for a 17% reduction in carbon emissions by 2020, 42% reduction by 2030, and 83% reduction by 2050 relative to 2005 levels. As an indication of just how controversial the cap-and-trade provisions are, it is still not entirely clear whether the Democratic leadership has enough votes within their own party. The bill has been watered down somewhat since its introduction back in March, but it still poses a very significant incremental cost to many industries over time. Bottom line: If this cap-and-trade legislation passes the House, it still needs to pass the Senate (which is an even more difficult task given that 60 votes are needed to avoid a filibuster). If it gets past both, then over time it will likely cause a major increase in electricity prices among other things, which would inherently restrain economic growth as consumers spend less on food, cars, manufactured goods, etc.”

In other news, the US Department of Commerce reported orders for airplanes and machinery produced a better-than-expected 1.8% increase in durable-goods orders in May, the third increase in durable-goods orders in 4 months (OGJ Online, June 25, 2009). However, orders for big-ticket items were down 5.1% in May from December.

Energy prices
The August contract for benchmark US light, sweet crudest recouped $1.56 to $70.23/bbl June 25 on the New York Mercantile Exchange. The September contract regained $1.58 to $71.08/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.56 to $70.23/bbl, in tandem with the New York futures market price. Heating oil for July delivery gained 3.82¢ to $1.78/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month was up 5.58¢ to $1.90/gal.

The July natural gas contract escalated by 8.3¢ to $3.84/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 1¢ to $3.81/MMbtu.

In London, the August IPE contract for North Sea Brent crude increased $1.45 to $69.78/bbl. Gas oil for July gained $3.50 to $568/tonne.

The average price for OPEC’s basket of 12 reference crudes rose 53¢ to $68.54/bbl on June 25.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

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...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

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...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

MARKET WATCH: NYMEX crude oil price slides below $61/bbl

12/11/2014 Crude oil prices fell below $61/bbl for January delivery on the New York market Dec. 10 after the Organization of Petroleum Exporting Countries low...

MARKET WATCH: US crude oil prices rebound modestly awaiting inventory report

12/10/2014 Crude oil prices rose modestly on the New York market Dec. 9 while analysts awaited the US government weekly inventory report on crude oil and prod...

ExxonMobil forecasts 35% higher world energy demand by 2040

12/10/2014 A significantly bigger global middle class, expanded emerging economies, and 2 billion more people will contribute to 35% higher world energy deman...

MARKET WATCH: Crude oil prices briefly dip to 5-year lows

12/09/2014 Oil prices on the New York and London markets remained volatile, briefly trading around lows not seen since 2009 although prices were attempting to...

White Papers

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

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


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


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

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