MARKET WATCH: Oil prices rebound as geopolitical fears increase

Oil prices rebounded June 18 with front-month crude up 0.7% in the New York market as geopolitical fears pushed oil futures to a 9-month high, said analysts in the Houston office of Raymond James & Associates Inc.

Russian President Vladimir Putin blocked US President Barack Obama’s bid for support to bring down Syrian President Bashar al-Assad during a summit meeting of the Group of 8 (G8, representing the economies of Canada, France, Germany, Italy, Japan, Russia, the UK, and the US) in Northern Ireland. Putin claimed the US plan to supply weapons to rebels trying to oust Assad would escalate violence in that country and could be used for attacks in Europe. Russia provides arms to Assad.

Raymond James analysts reported, “Broader markets rallied on economic data, with the US consumer price index increasing less than expected and potentially enabling the Federal Reserve Bank to hold off on policy changes for a little longer. The Standard & Poor’s 500 Index gained 0.8%, with energy stocks advancing in lockstep [with the SIG Oil Exploration & Production Index up 0.8% and the Oil Service Index up 0.7%].”

US inventories

The Energy Information Administration said June 19 commercial inventories of US crude increased 300,000 bbl to 394.1 million bbl in the week ended June 14, opposite Wall Street’s consensus for a 500,000 bbl decline. Gasoline stocks gained 200,000 bbl to 221.7 million bbl in the same period, short of the 800,000 bbl increase analysts expected. Finished gasoline inventories decreased while blending components rose. Distillate fuel inventories were down 500,000 bbl to 121.6 million bbl, compared with market predictions of 900,000 bbl growth.

Imports of crude into the US increased 586,000 b/d to 8.4 million b/d last week. In the 4 weeks through June 14, US imports of crude averaged 7.8 million b/d, down 1.3 million b/d from the comparable period a year ago. Imports of gasoline averaged 556,000 b/d last week; distillate fuel imports averaged 87,000 b/d.

The input of crude into US refineries increased 294,000 b/d to 15.5 million b/d last week with units operating at 89.3% of capacity. However, gasoline production decreased to 9.1 million b/d while distillate fuel production declined to 4.7 million b/d.

Energy prices

The July contract for benchmark US light, sweet crudes rallied by 67¢ to $98.44/bbl June 18 on the New York Mercantile Exchange. The August contract climbed 64¢ to $98.67/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 67¢ to $98.44/bbl.

Heating oil for July delivery recouped 1.14¢ to $2.94/gal on NYMEX. Reformulated stock for oxygenate blending for the same month recovered 2.33¢ to $2.88/gal.

The July natural gas contract continued rising, up 3¢ to $3.91/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., jumped 11.2¢, also closing at a rounded $3.91/MMbtu.

In London, the August IPE contract for North Sea Brent rebound 55¢ to $106.02/bbl. Gas oil for July dropped $1.25 to $892.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 75¢ to $103.10/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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