Crude oil futures prices gained modestly on the New York market June 9 but still showed about a 4% loss for the well overall, settling below $46/bbl for the third consecutive day. Brent crude oil for August delivery closed June 9 at just above $48/bbl, also up slightly for the trading session.
Oil prices found support on June 9 after Shell Development Co. of Nigeria declared force majeure on Nigerian Bonny light crude oil because of a leak in the Trans Niger Pipeline.
Foul play was suspected. The leak shows “the production trend in Nigeria is far from stable,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
Ebele Kemery, head of energy investing at J.P. Morgan Asset Management, told the Wall Street Journal she initially thought oil prices would rally during 2017, but then started doubting it in March. US producers ramped up production more quickly than anticipated while expectations for strong oil demand growth diminished, she said.
An unexpected build in US oil inventories made Kemery and other analysts question if the Organization of Petroleum Exporting Countries could meet its goal of reducing global stocks to the 5-year average.
Kemery expects prices could fall lower in 2018 than the current price unless OPEC takes more drastic action. “The OPEC cut—it’s almost like we need it just to stand still,” Kemery said.
OPEC and some other producers, including Russia, agreed in May to extend an agreement to cut their collective oil production by 1.8 million b/d through Mar. 31, 2018.
Giovanni Staunovo, UBS analyst, said, “The very slow decline in US crude inventories, despite all the cuts being implemented by OPEC and Russia, has the market questioning if OPEC can really succeed to bring down inventories to average levels.”
Meanwhile, US commercial crude inventories, excluding the Strategic Petroleum Reserve, increased nearly 3.3 million bbl for the week ended June 2 compared with the previous week, the US Energy Information Administration said in its Weekly Petroleum Status Report. The inventory increase ended eight consecutive weeks of falling stockpiles.
“I still believe that the weekly data was a one off, and now it’s time to wait for next Wednesday to see if it was an anomaly or if it was a change in the trend,” Staunovo said.
Energy prices
The July light, sweet crude contract on the New York Mercantile Exchange gained 19¢ to $45.83/bbl on June 9. The August contract rose 18¢ to close at $46.07/bbl.
The natural gas price for July gained a penny to a rounded $3.04/MMbtu. The Henry Hub cash gas price was $2.98/MMbtu, up 4¢.
Heating oil for July edged up less than 1¢ to $1.43/gal. Reformulated gasoline stock for oxygenate blending for July also gained less than a penny to $1.50/gal.
The Brent crude contract for August on London’s ICE rose 29¢ to $48.15/bbl on June 9. The September contract increased 27¢ to $48.53/bbl.
The June gas oil contract was $427.25/tonne on June 9, up $5.75.
OPEC’s basket of crudes on June 9 was $45.48/bbl, down 30¢.
Contact Paula Dittrick at [email protected].
