Light, sweet crude oil prices gained on the New York market June 18 while Brent crude prices for August climbed by $1.90/bbl in London. Oil prices have fluctuated between gains and losses in recent trading sessions.
Analysts attribute price volatility primarily to uncertainty regarding a June 22 meeting in Vienna between the Organization of Petroleum Exporting Countries and some other major producers.
“Short term, it’s all about the meeting,” said UBS analyst Giovanni Staunovo. Saudi Arabia and Russia have suggested they would like to increase production. Other producers could resist amending existing production-cut targets, now scheduled to expire Dec. 31.
OPEC and other producers, including Russia, have cooperated with oil production-cut targets since 2017. They have withheld about 1.8 million b/d of production compared with 2016 levels.
In addition, oil traders are monitoring tensions in US-China trade relations. US President Donald Trump intends to impose tariffs on China, prompting China to say it will retaliate with tariffs on US products, including oil and various agricultural products.
Sam Margolin, Cowen and Co. analyst, said US tariffs against China could push down US oil prices but prove inflationary for Brent prices if OPEC does not rise production.
Regarding trade issues, Commerzbank analysts said punitive tariffs by China means “that US crude oil would no longer be a low-cost alternative despite the current price discount,” Commerzbank said.
Helima Croft of RBC Capital Markets said market volatility around the OPEC meeting could be obscuring another issue regarding Middle East oil flow. The Trump administration plans to fully reimpose unilateral sanctions on Iran on Aug. 6.
“Everyone is so focused on June 22. I think the bigger question is what happens with the state of the nuclear deal,” Croft said. “Are the Iranians going to be content to remain in the deal if they don’t receive any economic benefits from it? It’s a real risk that they break the seal and resume high-level enrichment.”
Trump announced plans in May for a US exit from an international agreement with Iran. The agreement from 2016 resulted in Iranian officials promising to limit Iran’s nuclear program in return for international sanctions being lifted in January 2017.
Elsewhere, Libya’s National Oil Corp. confirmed the loss of two storage tanks at Ras Lanuf port terminal. NOC had declared force majeure on crude oil loadings from Ras Lanuf and Es Sider port terminals starting June 14 (OGJ Online, June 18, 2018).
Damage caused by militia attacks reduced crude oil storage capacity to 550,000 bbl compared with 950,000 bbl at Ras Lanuf, NOC said.
Energy prices
The July light, sweet crude contract on the New York Mercantile Exchange fell 79¢ to settle at $65.85/bbl on June 18. The August price dropped 84¢ to $65.69/bbl.
The NYMEX natural gas price for July declined 7¢ to a rounded $2.95/MMbtu. The Henry Hub cash gas price decreased 1¢ to $2.97/MMbtu on June 18.
Ultralow-sulfur diesel for July added 4¢ to a rounded $2.13/gal. The NYMEX reformulated gasoline blendstock for July increased 3¢ to a rounded $2.05/gal.
Brent crude oil for August climbed $1.90 to $75.34/bbl on London’s International Commodity Exchange. The September contract increased $1.86 to $74.94/bbl. The gas oil contract for July was $648/tonne, up $7.25.
OPEC’s basket of crudes averaged $71.09/bbl on June 18, down $1.70.
Contact Paula Dittrick at [email protected].
