Crude oil prices fell modestly on both New York and London markets June 25 as traders and analysts contemplated a decision by the Organization of Petroleum Exporting Countries and other major producers, including Russia, to begin increasing crude output effective July 1.
OPEC and 10 producers outside the oil cartel, including Russia, have been holding back crude production since Jan. 1, 2017. Upon conclusion of a June 22 meeting in Vienna, OPEC said it will stop overcompliance with existing production-cut targets (OGJ Online, June 25, 2018).
Oil prices rose on supply concerns in early June 26 trading, which analysts largely attributed to a shutdown at the Syncrude oil sands project in Canada. Problems stemmed from a power disruption last week at Syncrude’s Mildred Lake, Alta., crude oil upgrading plant.
Syncrude is a joint venture of Imperial Oil Ltd., Nexen Oil Sands Partnership, Sinopec Oil Sands Partnership, and Suncor Energy Inc.
Goldman Sachs analysts said the Syncrude outage could lead to crude oil shortages in the US and Canada throughout July, shrinking supplies at the US storage hub in Cushing, Okla., where inventories already had dropped with the start of summer driving season.
The Syncrude outage will support US oil prices, Goldman Sachs analysts said, adding that plans by OPEC and other major producers to raise production could put downward pressure on Brent crude prices.
“With the global market pricing to pull crude out of the US, this loss of US supplies will exacerbate the current global deficit, making the increase in OPEC production all the more required,” Goldman Sachs analysts wrote. “And while Saudi Arabia is already ramping up exports, these will not be delivered until August with June stock draws already accelerating.”
RBC Capital Markets analyst Mike Tran outlined what he calls “a structurally bullish outlook underpinned by a global fundamental backdrop that is shaping up to be the most constructive in years.”
Regarding 2018 oil prices, RBC forecast light, sweet crude will average $68/bbl and Brent will average $76/bbl. RBC’s 2019 oil price forecast calls for light, sweet crude to average $76/bbl and Brent to average $85.50/bbl.
Energy prices
The August light, sweet crude contract on the New York Mercantile Exchange dropped 50¢ to settle at $68.08/bbl on June 25. The August price was down 59¢ to $67.04/bbl.
The NYMEX natural gas price for July declined 2¢ to a rounded $2.92/MMbtu. The Henry Hub cash gas price fell 1¢ to $2.93/MMbtu on June 25.
Ultralow-sulfur diesel for July dropped 2.5¢ to a rounded $2.10/gal. The NYMEX reformulated gasoline blendstock for July declined nearly 2¢ to a rounded $2.05/gal.
Brent crude oil for August fell 82¢ to $74.73/bbl on London’s International Commodity Exchange. The September contract decreased 77¢ to $74.55/bbl. The gas oil contract for July was $642.50/tonne, up $3.75.
OPEC’s basket of crudes averaged $72.15/bbl on June 25, up 26¢.
Contact Paula Dittrick at [email protected].
