MARKET WATCH: Energy prices waffle as crude, gas trend down

Energy prices continued to waffle with the front-month crude contract down 3.1% for the week in the New York market while the West Texas Intermediate-North Sea Brent spread widened to $2.47/bbl July 26, despite an earlier bullish report of declining US inventories. Natural gas fell 6.2% last week.

In Houston, analysts at Raymond James & Associates Inc. reported, “Broader equity markets remained mostly flat, with the Standard & Poor’s 500 Index down 0.4% and the Dow Jones Industrial Average up less than 0.1%.” But falling commodity prices brought the SIG Oil Exploration & Production Index down 1.5% while the Oil Service Index lost 2.5%. Oil futures prices were up in early trading July 29, but gas futures remained in the red.

Commodity Futures Trading Commission data showed speculative length in exchange-traded crude and metals rose last week. “Crude oil and palladium remain crowded trades, and…it will become increasingly difficult to find the marginal buyer in the futures market for these two commodities,” said Walter de Wet at Standard New York Securities Inc., the Standard Bank Group.

The net speculative length for front-month benchmark crude as a percentage of open interest on the New York Mercantile Exchange stands at 14.9%—“the highest level in more than 5 years and almost double the 5-year average of 7.6%,” De Wet reported. However, he reiterated, “We believe the recent buoyancy in WTI reflects an extrapolation of recent trends in consumer and inventory data (and the inference drawn from this about US gasoline demand over the US driving season), and we feel such buoyancy may be overdone. We would look for both Brent and WTI to ease well below $105/bbl in the coming weeks.

One reason for the recent escalation of the premium on Brent crude is the geopolitical turmoil in Egypt where more than 80 people were reported killed in a July 28 clash between the police and supporters of the ousted President Mohammed Morsi. Conflict in Egypt has “added to a long-standing premium reflecting the market’s fear of war with Iran and a shutdown of the Strait of Hormuz,” Raymond James analysts said. They put the overall premium at $15-20/bbl.

Palestinian leader Mahmoud Abbas met July 29 with Egypt’s interim president in Cairo in a show of support for that government. Meanwhile, Israeli and Palestinian representatives flew to Washington, DC, in an effort to resume peace talks, despite widespread skepticism after 20 years of failed attempts. And there is yet no resolution to the confrontation over Iran’s proposed nuclear program.

“Our view is that the concerns about Iran are generally overblown, but the fear trade regarding Egypt is even more irrational because Egyptian politics do not carry any objective risk to oil supply,” Raymond James analysts said. “There are actual geopolitical supply disruptions taking place such as in Libya and Nigeria over the past 6 months, but ironically, the oil market tends to ignore these outages and focuses instead on the high-impact, low-probability risks that almost never materialize.”

In other news, The Economic Times of India reported natural gas now is flowing into China from Myanmar via a recently completed pipeline and is estimated to satisfy about a quarter of Chinese gas demand. China remains the top investor in Myanmar’s energy sector, though western companies also see an opening following the government's recent political reforms, Raymond James analysts said.

In an interview published over the weekend in the New York Times, President Barack Obama’s sounded “noncommittal” about the proposed Keystone XL pipeline to transport oil from Canada to the US, said Raymond James analysts. “Echoing the concerns of environmentalists, Obama said explicitly that the decision would partly be based on the project’s carbon footprint, and he also rejected arguments that the project would be a major job creator. On the other hand, he said he hopes Canada would ‘be doing more to mitigate carbon release’ (vis-a-vis oil sands production), indicating that environmental steps on Canada’s part could be helpful for securing project approval. He did not specify any timetable for wrapping up the State Department’s review, which would then be sent to the White House for a final decision,” they reported.

Raymond James analysts also cited a Wall Street Journal report that the breakeven basket price for crude sold by members of the Organization of Petroleum Exporting Countries has risen to $105/bbl instead of the $80-90/bbl estimated by the UN’s International Monetary Fund. That’s based on a new study published by Apicorp, a lending group set up by Arab oil producers.

The average price for OPEC’s basket of 12 benchmark crudes decreased 18¢ to $105.10/bbl on July 26. So far this year OPEC’s basket price has averaged $104.99/bbl.

Energy prices

The September contract for benchmark US light, sweet crudes dropped 79¢ to $104.70/bbl July 26 on NYMEX. The October contract lost 46¢ to $104.01/bbl. On the US spot market, WTI at Cushing, Okla., trailed the front-month futures contract down 79¢ to $104.70/bbl.

Heating oil for August delivery continued its decline, down 2.49¢ to $3.01/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, rose 2.74¢ to $3.04/gal.

The August natural gas contract remained in retreat, falling 8.9¢ to $3.56/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 6.1¢ to $3.59/MMbtu.

In London, the September IPE contract for North Sea Brent was down 48¢ to $107.17/bbl. Gas oil for August retreated $3.25 to $910.50/tonne.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Chinese regulators approve Sinopec’s plan for grassroots refinery

02/06/2015 China’s National Development and Reform Commission (NDRC) has approved Sinopec Beijing Yanshan Petrochemical Co. Ltd., a subsidiary of China Nation...

BOEM schedules public meetings about draft proposed 5-year OCS plan

02/06/2015 The US Bureau of Ocean Energy Management will hold the first of 20 public meetings in Washington on Feb. 9 to receive public comments on potential ...

Union strike ongoing at US refineries as negotiations continue

02/06/2015 A strike by union workers at nine US refining and petrochemical production plants remains under way as the United Steelworkers Union (USW) continue...

NCOC lets $1.8-billion pipeline contract for Kashagan field

02/06/2015 North Caspian Operating Co. (NCOC) has let a $1.8-billion engineering and construction contract to ERSAI Caspian Contractor LLC, a subsidiary of Sa...

AOPL releases 2015 safety performance and strategic planning report

02/06/2015 The Association of Oil Pipe Lines is committed to further improvements despite a 99.99% safe petroleum liquids delivery rate, AOPL Pres. and Chief ...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...

Congressional Republicans renew bid to halt sue-and-settle maneuvers

02/05/2015 Calling it an affront to regulatory accountability that results in unchecked compliance burdens, US Sen. Charles E. Grassley (R-Iowa) and US Rep. D...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...
White Papers

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...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

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


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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