Light, sweet crude oil prices fell by more than $1/bbl on the New York market June 1 while the Brent contract for August delivery fell nearly 80¢/bbl. Analysts attributed the price drops to increased US oil production.
Meanwhile, analysts await a June 20-21 meeting in Vienna of members of the Organization of Petroleum Exporting Countries and other major producers who are expected to discuss the future of production-cut targets, now scheduled to expire on Dec. 21.
“It’s a combination of shale becoming a bigger force, and then you have this more cyclical story of inventories coming down helped by OPEC cuts, Venezuela, and strong demand,” Francisco Blanch, Bank of America Merrill Lynch head of commodities research, told the Wall Street Journal.
Venezuela’s economic crisis has hobbled its oil production. Tensions remain high across the Middle East, where Yemeni rebels reportedly are targeting Saudi Arabian oil infrastructure. Meanwhile, Israel last month hit suspected Iranian military targets in Syria.
Israel has said Iranian forces in Syria fired missiles at the Israeli-held section of the Golan Heights. Prime Minister Benjamin Netanyahu said Iran had “crossed a red line.”
Separately, US officials are moving to reinstate economic sanctions against Iran, which analysts say likely will reduce its oil exports and production. Analysts expect US sanctions alone will be less effective than previous sanctions imposed by an international alliance.
US President Donald Trump has withdrawn US participation from an international agreement that lifted sanctions against Iran in exchange for Iran agreeing to curb its nuclear program.
The US Energy Information Administration’s Weekly Petroleum Status Report also said US oil production gained 44,000 b/d for the week ended May 25 to 10.769 million b/d (OGJ Online, June 1, 2018).
The US drilling rig count, meanwhile, was up 1 unit to 1,060 for the week ended June 1. Baker Hughes statistics showed 144 rigs compared with the same period a year ago (OGJ Online, June 1, 2018). Analyst closely watch the Baker Hughes weekly rig count for an indicator of future production.
Energy prices
The July light, sweet crude contract on the New York Mercantile Exchange fell $1.23 to settle at $65.81/bbl on June 1. The August price was down $1.14 to $65.77/bbl.
The NYMEX natural gas price for July gained 1¢ to a rounded $2.96/MMbtu. The Henry Hub cash gas price gained 1¢ to $2.90/MMbtu on June 1.
Ultralow-sulfur diesel for July declined a rounded 3¢ to a rounded $2.18/gal. The NYMEX reformulated gasoline blendstock for July fell nearly 2¢ to settle at $2.14/gal.
Brent crude oil for August declined 77¢ to settle at $76.79/bbl on London’s International Commodity Exchange. The September contract was down 74¢ to $76.51/bbl. The gas oil contract for June was $671.25/tonne, down $14.25.
OPEC’s basket of crudes was $74.23/bbl on June 1, down 94¢.
Contact Paula Dittrick at [email protected].
