MARKET WATCH: Geopolitical risk premium ‘repriced’ in global oil markets

The geopolitical risk premium in the world’s oil markets has been “repriced” for now, according to analysts at Barclays Capital Inc. In a Sept. 13 commodities research note, analysts said, “Crude oil markets have settled back into a familiar range once again, as international tension surrounding Syria cools off. While the probability of an immediate western-led military intervention in Syria has eased for now, we expect it to remain on the markets radar, given the contagion risks the event holds for other supply centers in the region’s radius (most notably Iraq).”

They added, “In our view, while diplomatic efforts to avert an immediate military intervention in Syria have led to the market repricing geopolitical premium for now, the current state of global balances suggest that Brent prices could once again trade within the remits of its precrisis range, until the next geopolitical trigger takes shape.”

Considering natural gas in the US, meanwhile, Barclays analysts noted that more LNG export projects should gain traction. “We believe that LNG export capacity from the US should grow to 6-10 bcfd by the end of 2020. While LNG exports could support prices in the longer run, the forward curve is unlikely to strengthen significantly in the near term, as the market is focused on the continued strong performance of production,” they said.

Energy prices

The October contract for benchmark US light, sweet crudes on the New York Mercantile Exchange climbed $1.04 on Sept. 12, settling at $108.60/bbl. The November crude contract was up $1.11 to settle at $107.75/bbl.

Heating oil for October delivery increased by about 5¢ to a rounded $3.12/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for October gained 5¢ to a rounded $2.76/gal.

The October natural gas contract rose by 7.1¢ to close at a rounded $3.64/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La. was a rounded $3.65/MMbtu, a 5¢ jump from the previous day’s closing.

In London, the October IPE contract for North Sea Brent crude added $1.13 to $112.63/bbl. The September contract for gas oil closed at $943.50/tonne, while the new front-month contract for October closed up $7.50, settling at 951.50/tonne.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes increased 43¢ to $109.83/bbl on Sept. 12.

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