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MARKET WATCH: Harsher US sanctions lift oil prices

After a rough start July 12, energy prices in the New York market registered pocket-change gains in a late rally as the US Department of the Treasury announced harsher sanctions against Iran aimed at punishing “front companies” that circumvent international action against that country.

Indications of reduced demand growth in Asia and Australia along with the International Energy Agency’s report of muted economic recovery had front-month crude prices “down but not out” early in the session, said analysts in the Houston office of Raymond James & Associates Inc. Following the Treasury statement, however, crude closed 0.3% higher. The Oil Service Index and the SIG Oil Exploration & Production Index indices fell 0.3% and 1.2%, respectively, against a broader market loss of 0.5%, they said. Oil prices were up but natural gas was down in early trading July 13.

The US Department of Labor said July 13 the producer price index inched up 0.1% in June compared with a 1% decrease in May. Increased costs for food and pickup trucks offset a continued decline in energy prices, the Associated Press reported. Food prices increased 0.5% while meat prices escalated 3.1%, the largest gain in nearly a year. The drought that is ruining corn crops across the Midwest is expected to drive prices higher for both meat and ethanol.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, noted Energy Information Administration data showing US coal production is up 1.6 in the latest week and 0.3% from a year ago. “Given the concerns that the US’s current preference for natural gas over coal will lead to the country becoming a stronger net exporter of coal, the news might weigh down an already dour market,” he said.

Energy prices

The August and September contracts for benchmark US light, sweet crudes increased 27¢ each to $86.08/bbl and $86.46/bbl, respectively, July 12 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up 27¢ to $86.08/bbl.

Heating oil for August delivery increased 1.15¢ to $2.77/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 3.73¢ to $2.81/gal.

The August natural gas contract advanced 2.1¢ to $2.87/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 5.4¢ to $2.79/MMbtu.

In London, the August IPE contract for North Sea Brent rose 84¢ to $101.07/bbl. Gas oil for July was unchanged at $874/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 57¢ to $97.41/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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