MARKET WATCH: NYMEX oil prices drop for fifth consecutive trading session

Oil prices continued their downward trend Sept. 25 following an unexpected increase in US oil inventories and on the possibility that some international sanctions against Iran might be reduced pending ongoing talks at the United Nations (OGJ Online, Sept. 25, 2013).

US Sec. of State John Kerry was scheduled to meet Iran Foreign Minister Javad Sarif in New York on Sept. 26.

Analysts with Barclays Research issued a research note saying upside risks in oil remain high, despite an immediate easing of the international community’s tensions with Syria and the prospect of a thaw in US relations with Iran.

“Iraq is deteriorating again, the problems afflicting Libyan oil exports look intractable, and spare crude oil capacity is perilously low,” Barclays analysts said. “The bottom line is that there is little evidence that the global economy is anywhere near embarking on a period of sustained recovery.”

Recent unrest in Egypt and Syria reminded market participants of Middle East volatility, helping boost oil prices to 6-month highs.

Currently, market anxiety about the Middle East has begun to recede, Barclays analysts said, adding that they still see multiple “potential flashpoints” for oil prices given what they call a “diminishing ability of the oil market to absorb supply shocks.”

Supply losses for Libya, Iraq, Nigeria, and the longer-term disruption of sanction-hit Iranian oil means Saudi Arabia has increased its production. Barclays estimates that spare capacity for the Organization of Petroleum Exporting Countries is nearing August 2008 levels when oil prices peaked above $140/bbl.

“Consequently, we would caution that the potential regional spillover effects of both the Egyptian and Syrian conflicts continue to warrant close attention,” analysts said. “Moreover, several important oil producers are experiencing pronounced political and security challenges that could have negative implications for their production profiles. However, somewhat surprisingly, Iran has emerged as a potential bright spot, with the election of the moderate cleric Hassan Rouhani raising hopes of a reset in the country’s relations with the West.”

Energy prices

The NYMEX November contract for benchmark US light, sweet crudes declined by 47¢ on Sept. 25, settling at $102.66/bbl. The December crude contract fell 43¢ to settle at $102.05/bbl.

Heating oil for October delivery gained 1.2¢ to $2.97/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for October rose by 1.3¢ to a rounded $2.67/gal.

The October natural gas contract edged down by less than 1¢ to remain at a rounded $3.49/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La. was a rounded $3.52/MMbtu, a 6¢ decrease.

In London, the November IPE contract for North Sea Brent crude lost 32¢ to $108.32/bbl. The October contract for gas oil settled up $13 to $919/tonne.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes rose 73¢ to $106.53/bbl on Sept. 25.

Contact Paula Dittrick at paulad@ogjonline.com.

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