MARKET WATCH: Crude oil prices hit 6-week highs

Sam Fletcher
OGJ Senior Writer

HOUSTON, July 25 -- Energy prices generally increased July 22 with both West Texas Intermediate and North Sea Brent up 1% to 6-week highs as the markets’ risk appetite improved following the second bail-out plan for Greece in as many years and the decision of the International Energy Agency not to release more oil from emergency reserves.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “The term structures for Brent strengthened on news of further delays in underlying Brent physical cargoes.” Net for last week, front-month contracts gained $2.61/bbl for WTI and $1.41/bbl for Brent, boosted by a stronger euro.

“Equity markets also strengthened over the last week on better earnings. Macroeconomic data from the US pointed to some improvement in the US housing market, and the manufacturing sector might quicken after the soft patch in the second quarter,” Zhang said.

Corporate energy stock prices climbed higher July 22, but broader markets were flat, said analysts in the Houston office of Raymond James & Associates Inc. However, they looked for futures prices to be “sharply lower” in early trading July 25 as continued brinkmanship between Democrats and Republicans fanned fears they will not reach agreement on debt and budget cutbacks before the Aug. 2 deadline.

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “The main macroeconomic input of last week was the European Union agreement on a second rescue plan…for Greece. This being the EU, it means that the agreement still needs to be validated by the different parliaments; for Germany, that will not come before Sept. 6. The details of the plan are still to be worked out. For now it buys some time, but it is not preventing the rating agencies from downgrading Greece further.”

Jakob said, “The political circus over the US debt level will probably last until the last hours before Aug. 2.”

Zhang said, “The US debt will be dominating the headlines, as the Aug. 2 deadline is fast approaching.” But barring a US default, he said, “We do not see significant impact on the oil market to the downside. Instead, an agreement over US debt-ceiling and budget is most likely to boost the oil market, together with other risky assets. We believe that the oil flat price remains supported by strong investment demand and abundant dollar liquidity, while refining margins are likely to come under pressure from high refinery runs and soft demand.”

The latest US Commodity Futures Trading Commission report showed money managers increased their net length in crude sharply, by 7.6% from the previous week (on futures and options combined basis). Commercial hedgers’ net short positions grew significantly, by 9.5% in the week. “The data suggested both consumers and producers continue to step aside from hedging activities, as growth in consumers’ long-hedging outstripped increases in producers’ short-hedging positions. Meanwhile, swap dealers increased their net short positions further. The non-commercial net long position as a percentage of open interest stood at 7%, a half percentage point increase from last week,” said Zhang.

Standard & Poor’s 500 index gained 2.19% last week, reversing losses of the previous week, and was up 6.95% for the year. The NASDAQ gained 2.47% for the week and is up 7.76% for the year, once again testing the peaks of 2007.

“In the S&P we are back to a situation where apart from the financial sector most of the other sectors are close to record high levels. It is not the first time that we are at such levels in 2011, but at those elevated levels the S&P has each time failed to attract further momentum since we are still in a situation of high unemployment level and lower than expected gross domestic product in the West while China continues to implement policies to prevent overheating,” Jakob warned. “During the week, the best performing S&P sector was again energy sector. For the year, energy is still the best performing sector (up 17%) and financials the only sector in the red (down 3.9%).”

He noted cash assets of US commercial banks during the week and “very close to their recent record high levels” of $2 trillion.

Citing a weekend article in Barron’s magazine, Raymond James analysts said the disconnect between WTI prices relative to seaborne crudes (North Sea Brent and Light Louisiana Sweet) along with the consequent rebound in refining margins for domestic refiners able to obtain the cheaper feedstock “remains one of the key bullish themes within the refining industry,” providing earnings momentum that sparked the shares of many refiners earlier this year. They said, “The refiners have been the best performing group in energy year-to-date. The question remains though as to how sustainable are current crack spreads (above $30/bbl), particularly given the oil demand headwinds domestically and abroad?”

In other news, Raymond James analysts reported US coal exports “continue tracking toward a 20-year high. “If one thinks about the robust 10- to 20-year projections for global coal demand growth and then considers the fact that approximately 30% of the known worldwide coal reserves reside in the US, it should come as no surprise that the U.S. should see increasing exports over time,” they said.

AccuWeather.com reports prolonged dry conditions from the Midwest to the mid-Atlantic this summer have already affected the corn crop, an important staple along the parched agricultural zone from Iowa to Pennsylvania.

Throughout the spring months, persistent rain delayed planting in many parts of the Corn Belt, while quick drying turned the soil as hard as concrete, the online weather service reported. With corn now in tassel, there's no rain to aid in pollination, and the plants are stressed. The reduced crop yield might force farmers to incur additional costs of buying feed for animals. Of course, it will also affect the ethanol market.

Energy prices
The September and October contracts for benchmark US light, sweet crudes each increased by 74¢, to $99.87/bbl and $100.20/bbl, respectively, July 22 on the New York Mercantile Exchange. The front-month contract traded as high as $100.21/bbl during that session. On the US spot market, WTI at Cushing, Okla., dropped 63¢ to $99.56/bbl as it tried to get in step with the front-month futures contract.

Heating oil for August delivery and reformulated blend stock for oxygenate blending for the same month both closed at $3.13/gal on NYMEX, up 2.88¢ and 3.06¢, respectively.

The August contract for natural gas inched up 0.4¢ but closed essentially unchanged at a rounded price of $4.40/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 9.8¢ to $4.47/MMbtu.

In London, the September IPE contract for North Sea Brent rose $1.16 to $118.67/bbl. Gas oil for August dipped 50¢ to $982.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 46¢ to $113.66/bbl. So far this year, OPEC’s basket price has averaged $107.21/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

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

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When 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


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

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