MARKET WATCH: NYMEX crude oil futures for July top $107/bbl

Oil prices climbed on the New York market on June 20 while Brent prices fell on the London market after having soared above $115/bbl earlier last week.

Analysts attributed the decline in Brent futures prices to traders’ expectations that oil production from key southern Iraqi oil fields is not immediately threatened by insurgency in northern Iraq.

Meanwhile, US Sec. of State John Kerry traveled to the Middle East where he stopped in Cairo and Amman.

Sunni militants representing the Islamic State of Iraq and al-Sham, or ISIS, continued sweeping through Iraqi towns during the weekend, seizing control of two border crossings with Jordan and Syria on June 22.

Ed Morse, Citigroup director of global commodity research, said front-month contract prices for crude largely are being driven by fears of what could happen to Iraqi exports.

"Nothing has changed in terms of the oil market," especially in the short term, Morse commented last week during a panel discussion hosted by Columbia University's Center on Global Energy Policy in New York last week. "If ever there were an experiment on defining a risk premium, this is it," he said.

Separately, Ole Hansen, head of Saxo Bank commodity strategy, also discussed recent market trends.

“Hedge funds and other large money managers turned net buyers of commodities for the first time in 9 weeks as geopolitical concerns, especially regarding Iraq, triggered strong buying of West Texas Intermediate crude oil, gold, and silver,” Hansen said.

Barclays Capital Inc. in New York issued a June 20 research note saying its analysts expect higher demand for crude from the Organization of Exporting Countries during the third quarter.

“Saudi Arabia, the main source of this capacity, is expected the meet the call while shouldering elevated domestic crude demand resulting from direct power burn,” Barclays said. “In the short term, a disruption of any size anywhere would likely force Saudi Arabia to raise output to three-decade highs and cut into its spare capacity.”

The gap between Brent and US light, sweet crude narrowed to $7.98/bbl for the August contract on June 20.

Barclays said the move in the Brent-WTI spread suggests “the market is pricing in prolonged instability in the Middle East.”

Energy prices

The New York Mercantile Exchange July crude oil contract price gained 83¢ on June 20 to close at $107.26/bbl. The August contract climbed 78¢ to $106.83/bbl.

The natural gas contract for July fell 5.3¢ to a rounded $4.53/MMbtu. On the US cash market, gas at Henry Hub, La., was $4.51/MMbtu, down 13¢.

Heating oil for July delivery was down less than a penny to remain at a rounded $3.05/gal. Reformulated gasoline stock for oxygenate blending for July delivery gained less than a penny to settle at a rounded $3.13/gal.

The August ICE contract for Brent crude delivery fell 25¢, closing at $114.81/bbl. The September contract declined 14¢ to $114.24/bbl. The ICE gas oil contract for July decreased $3.50 to $935.25/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for June 20 was $110.48, up 22¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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