Both light, sweet crude and Brent crude oil for September delivery settled down more than $1/bbl on markets in New York and London July 21. Analysts noted negative market sentiment pending a July 24 meeting of major producers to discuss production-cut targets.
Both crude oil benchmarks posted their seventh-lowest settlement of the year. Both have declined in 7 of 9 weeks. US oil fell 98¢/bbl and Brent fell 85¢/bbl for the week ended July 21.
Hans van Cleef, ABN-AMRO senior energy economist, said, “Market sentiment is deeply negative…. Investors are impatiently looking forward to a new supply-demand balance and are seizing upon every figure as a latest score to gain some sense of the market’s likely direction.”
The International Energy Agency recently estimated the Organization of Petroleum Exporting Countries compliance rate with production-cut targets at 78% for June compared with more than 90% in May.
Some representatives of OPEC and non-OPEC producers, including Russia, met July 24 to discuss production. They met in St. Petersburg where participants started gathering and talking informally during the weekend.
“With fewer countries adhering strictly to their commitments, output increased,” van Cleef said. OPEC members Nigeria and Libya are exempted from the original and extended production-cut targets.
“OPEC will no doubt soon send out a robust signal that any extra output from Nigeria and Libya will be offset by other members of the oil cartel,” he said. “In view of the current negative sentiment, it will take a lot more than a verbal signal to convince the market that the existing OPEC agreement is sufficient to rebalance the market.”
In early comments from the July 24 meeting, Saudi Arabia indicated it would make deeper production cuts and would limit its oil exports at 6.6 million b/d in August. Saudi Arabia Minister Khalid al-Falih urged other countries to do the same, especially limiting exports.
Nigeria reportedly agreed to hold some oil off the market.
Energy prices
The September light, sweet crude contract on NYMEX dropped $1.15 on July 21 to settle at $45.77/bbl. The October contract also fell $1.15 to close at $45.95/bbl.
The NYMEX natural gas price for August decreased 7¢ to a rounded $2.97/MMbtu. The Henry Hub cash gas price was $3.03/MMbtu, down 7¢.
Heating oil for August dropped nearly 3¢ to a rounded $1.52/gal. Reformulated gasoline stock for oxygenate blending for August fell 4¢ to a rounded $1.56/gal.
The Brent crude contract for September on London’s ICE declined $1.24 to $48.06/bbl. The October contract was down $1.21 to $48.31/bbl.
The August gas oil contract fell $10.75 to $452.75/tonne. OPEC’s basket of crudes on July 20 was $46.99/bbl, down 49¢.
Contact Paula Dittrick at [email protected].
