MARKET WATCH: Oil prices rise on Iran nuclear work reports

Crude oil and natural gas prices rose Nov. 8, up 1.3% each in the New York market, as Europe’s financial turmoil continued and Iran was reported working to put a nuclear payload on an intermediate-range missile capable of striking Israel.

The International Atomic Energy Agency (IAEA) under the United Nations reported Nov. 7 Iran is working specifically to develop nuclear weapons. Iran of course is the second biggest oil producer among members of the Organization of Petroleum Exporting Countries, behind Saudi Arabia. Its October production was estimated at 3.6 million b/d. “Any conflict in Iran could have serious supply implications for oil markets, and the anxiety this inspires has provided support to world oil prices for the past week,” said Raymond James analysts.

However, initial US reaction to IAEA’s report “has been conservative so far and not even suggesting harsh new sanctions against Iran (probably more sanctions on a few commercial banks),” said Olivier Jakob at Petromatrix in Zug, Switzerland.

“In our opinion the tone was more aggressive after the assassination attempt on the Saudi ambassador. Maybe the US administration has real concerns about Israel going alone after Iran, and therefore does not want to inflate the situation too much. ‘Iranium’ headlines will still need to be watched today. Russia and China are, however, unlikely to rush to allow an IAEA board resolution condemning Iran,” he said.

In Houston, analysts with Raymond James & Associates Inc. said, “Even before the IAEA report was published, Israel had openly contemplated military action against Iran’s nuclear program. Military action from Israel or its allies would likely result in Iran retaliating by trying to close the Strait of Hormuz, a major tanker route for oil exports from Saudi Arabia and Iran.”

They said, “Not surprisingly, this is causing some nervousness in the oil markets with crude rising 5% since Israel began mustering support for a military strike against Iran mid last week.”

Jakob said, “While crude oil futures continue to be supported by the ‘Iranium’ premium, the products are not following and the light-end cracks are suffering further. The naphtha and RBOB [reformulated stock for oxygenate blending] cracks to Brent are going, as we expected, deeper into negative territory, and the pressure is now coming to the European distillates physical premiums. This is something to follow closely given that the refining margins are currently supported only by the distillate and fuel oil crack. ICE gas oil expires tomorrow, and the backwardation is going through the roof, but with a very slow start to winter we have to monitor the weakening trend in the physical premiums.” He also noted heating oil in the New York market “is starting to enter contango territory.”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “Refining margins have dropped sharply since the beginning of this month, by around $4/bbl, as the market is anticipating an increase in refinery run rates at the end of the autumn maintenance season. Meanwhile, the term structures for West Texas Intermediate strengthened further in the wake of a sharp fall in crude inventories at Cushing, Okla. The Brent structure softened somewhat but remained in steep backwardation.

Meanwhile, President Giorgio Napolitano of Italy told uneasy markets that Premier Silvio Berlusconi has promised to resign after the next budget is approved by parliament and that Italy will have either a new government or early elections soon. Napolitano said economic reforms stipulated by other European Union members will be implemented within days. Raymond James analysts reported the New York equity market was up 1.2% Nov. 7 on Napolitano’s reassurances.

Zhang said, “Italy's 10-year government bond yield has exceeded the critical 7%—the level at which Greece, Portugal, and Ireland had to be bailed out. Although the departure of Berlusconi opens the door for a technocrat government, which is more likely to take control of the fiscal situation in Italy, the rapidly rising bond yield and Italy's hefty ongoing funding need is not allowing much time for a transition. The latest development in the Euro-zone appears to have spurred a general ‘risk-off’ sentiment in the market.”

Imports for Germany and France fell in September, “which could be a sign that demand in the two biggest Euro-zone economies might have declined,” said Zhang. Meanwhile, China’s inflation fell from 6.1% year-over-year in September to 5.5% in October.

Zhang said the increase in oil prices also was stimulated by technical buying and a further decline in US oil inventories.

US inventories

The Energy Information Administration said Nov. 9 commercial inventories of US crude dropped 1.4 million bbl to 338.1 million bbl in the week ended Nov. 4. The Wall Street consensus was for a 500,000 bbl increase. Gasoline fell 2.1 million bbl to 204.2 million bbl in the same period, counter to market expectations of a 1 million bbl build. Both finished gasoline and blending components decreased last week. Distillate fuel inventories plummeted 6 million bbl to 135.9 million bbl, far surpassing the market’s outlook for a 2.2 million bbl decline, EIA said.

The American Petroleum Institute earlier reported US crude stocks increased 148,000 bbl to 340 million bbl in the week ended Nov. 4. API said gasoline inventories declined 1.5 million bbl to 207.1 million bbl, while distillate stocks were down 2.9 million bbl to 141.6 million bbl.

EIA said imports of crude into the US declined 336,000 b/d to 8.6 million b/d last week. In the 4 weeks through Nov. 4, crude imports averaged 8.7 million b/d, up 34,000 b/d from the comparable period last year. Gasoline imports averaged 750,000 b/d, while distillate fuel imports averaged 102,000 b/d.

The input of crude into US refineries dropped 358,000 b/d to 14.3 million b/d last week with units operating at 82.6% of capacity, said EIA. Gasoline production decreased to 8.8 million b/d and distillate fuel production declined to 4.3 million b/d.

Energy prices

The December contract for benchmark US light, sweet crudes continued climbing Nov. 7, up $1.28 to $96.80/bbl on the New York Mercantile Exchange. The January contract increased $1.25 to $96.70/bbl. On the US spot market, WTI at Cushing rose $1.28 to $96.80/bbl, in step with the front-month futures price.

Heating oil for December delivery dipped 0.37¢ but closed essentially unchanged at a rounded $3.12/gal on NYMEX. RBOB for the same month declined 2.18¢ to $2.71/gal.

The December natural gas contract increased 4.9¢ to $3.75/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., rose 7.3¢ to $3.43/MMbtu.

In London, the December IPE contract for North Sea Brent advanced by 44¢ to $115/bbl. Gas oil for November gained $10 to $994.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes escalated $2.71 to $113.79/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

India’s IOC to invest in processing-related upgrades, expansions

02/19/2015 Indian Oil Corp. Ltd. (IOC) has approved a series of expansions and upgrades designed to improve fuel quality and production at several of its refi...

PwC: Chemicals industry M&A activity in 2014 reached 10-year high

02/19/2015 Mergers and acquisitions (M&A) activity in the US chemicals business ramped up substantially in 2014, recording the highest volume in a decade ...

Talisman shareholders approve acquisition by Repsol

02/19/2015

Shareholders of Talisman Energy Inc., Calgary, have approved the acquisition of the company by Spain’s Repsol SA.

Marathon revises down budget by 20%

02/19/2015

Marathon Oil Corp., Houston, has reduced its capital, investment, and exploration budget for 2015 by another 20% to $3.5 billion.

Texas private equity firm to help fund Pennsylvania gas-fired power plant

02/19/2015 Panda Power Funds agreed to jointly develop a 1,000-Mw Pennsylvania power project that will use natural gas from the Marcellus shale, the Dallas pr...

MARKET WATCH: NYMEX crude oil prices drop before weekly inventory report

02/19/2015 US light, sweet crude oil prices for March delivery settled down more than $1/bbl on the New York market Feb. 18 awaiting the government’s weekly r...

Santos finalizes Papua New Guinea permit acquisition

02/19/2015 Santos Ltd. has finalized its acquisition of 50% interest in exploration permit PPL 269 in Papua New Guinea from New Guinea Energy for an initial p...

ExxonMobil investigating explosion at Torrance refinery

02/19/2015 An investigation is under way into the cause of an explosion and ensuing fire that took place at ExxonMobil Corp.’s 149,500-b/d Torrance, Calif., r...

Murkowski, Heitkamp lead Senate call for crude exports to Mexico

02/18/2015 US Sens. Lisa Murkowski (R-Alas.) and Heidi Heitkamp (D-ND) led a coalition asking US Sec. of Commerce Penny Pritzker in a Feb. 18 letter to encour...
White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

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...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

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


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