While equity markets weakened for a third consecutive session July 9 due to the troubled Spanish economy and a slowdown in China, energy prices rebound with the front-month crude contract up 1.8% in New York as Norway appeared headed for a midnight shutdown of offshore production in a labor dispute.
Literally at the 11th hour, however, the Norwegian government intervened to force mandatory arbitration between labor and management. As a result, Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, reported Brent crude was down more than $1/bbl when the market opened July 10 but appeared to be inching back to $100/bbl in early trading. “Much of the support after the selloff is on the back of a marginally weaker US dollar,” he said.
“Consistent with action taken in the past, the government stepped in to avoid the lockout and protect economic interests,” said analysts in the Houston office of Raymond James & Associates Inc. Labor and management failed to negotiate a settlement in the 3-week dispute over pensions and retirement. About 10% of offshore workers in Norway have been on strike since June 24, and offshore operators had scheduled a lockout for midnight July 9. “It is estimated that the strike already cut off 13% of Norway's oil production and 4% of the country's gas output,” Raymond James analysts said.
Meanwhile, the front-month natural gas contract rose 3.9% in the New York market on forecasts for warmer temperatures in mid-July. The Oil Service Index and the SIG Oil Exploration & Production Index were up 0.8% and 1% respectively.
“The latest Commodity Futures Trading Commission data indicated net speculative length ended 8 weeks of successive declines, adding a respectable 21.7 million bbl this past week. This was unsurprising, given the supply concerns (European Union sanctions on Iranian oil, and strike activity in Norway),” said De Wet. With the Norwegian strike now ended, he said, “We could see confidence falter in this week’s data.” He expects oil prices to remain range-bound in July 10 trading.
Energy commodities generally regained some of their losses from the previous session. The August and September contracts for benchmark US sweet, light crudes climbed $1.54 each to $85.99/bbl and $86.37/bbl, respectively, July 9 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up $1.54 to match the front-month futures contract’s closing at $85.99/bbl.
Heating oil for August delivery increased 3.91¢ to $2.75/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 4.34¢ to $2.76/gal.
The August natural gas contract gained 10.7¢ to $2.88/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., dropped 10.4¢ to $2.82/MMbtu.
In London, the August IPE contract for North Sea Brent recouped $2.13 to $100.32/bbl. Gas oil for July was up $5 to $873.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dipped 1¢ to $96.92/bbl.
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