An agreement between the Libyan government and rebels to reopen two oil ports in eastern Libya contributed to a slip in crude oil prices in July 2 trading in both New York and London markets although analysts noted that similar agreements have fallen through in recent months.
The two ports, Es Sider and Ras Lanuf, handle nearly half of Libya’s normal oil exports that were disrupted by strikes and armed occupations. A resumption of Libyan oil exports could ease concerns about supply disruptions from Iraq.
Crude oil prices are apt be influenced only modestly by ongoing tensions in Iraq, said Hans van Cleef, senior energy economist with ABN AMRO in Amsterdam. He noted the insurgency is concentrated in northwest Iraq and has not reached southern Iraqi oil production.
“At present, oil exports are coming from Basra in the southeast of Iraq on the Persian Gulf. Since the unrest increased in mid-June, oil production and exports have continued unabated in the south of Iraq,” van Cleef said.
“ABN AMRO expects that neighboring oil producers…and the international community (especially the US) will not simply stand idly by and allow” insurgents to seize control of Baghdad and key oil fields, he said. “Moreover, the market is aware that if oil production in Iraq is reduced, the shortfall can, in principle, be offset by additional oil production” from Saudi Arabia and others.
ABN AMRO said its basic scenario for the next 2 years envisages stable or slightly lower oil prices, assuming sufficient oil supplies worldwide.
Meanwhile, US natural gas futures and cash prices fell during July 2 trading awaiting a weekly gas storage report.
The US Energy Information Administration estimated working gas in storage at 1.9 tcf as of June 27, and that was a net increase of 100 bcf from the previous week. Stocks were 666 bcf less than last year at this time and 790 bcf below the 5-year average of 2.7 tcf.
Analysts and traders surveyed by the Wall Street Journal had expected storage levels to rise by 101 bcf.
Underground gas storage in the Lower 48 ended the winter at 11-year lows.
Meanwhile, the National Hurricane Center said Tropical Storm Arthur strengthened to a hurricane early July 3 and threatened the eastern coastal states for the upcoming Independence Day holiday in the US.
The natural gas contract for August declined 9.8¢ to a rounded $4.36/MMbtu, marking the lowest front-month closing price in weeks. On the US cash market, gas at Henry Hub, La., was $4.39/MMbtu, down 4¢.
Heating oil for August delivery was down 3.2¢ to a rounded $2.95/gal. Reformulated gasoline stock for oxygenate blending for August delivery dropped 1.26¢ to a rounded $3.02/gal.
The August ICE contract for Brent crude delivery declined $1.05, closing at $111.24/bbl. The September contract dropped 90¢ to $111.20/bbl. The ICE gas oil contract for July fell $5.25 to $908.75/tonne.
The Organization of Petroleum Exporting Countries basket of 12 benchmark crudes for July 2 was $108.35/bbl, down 33¢ from July 1.
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