The light, sweet crude oil price for July delivery climbed more than $1/bbl on the New York market June 20 after the US Energy Information Administration reported a bigger-than-expected drop in oil supplies.
US crude oil inventories, excluding the Strategic Petroleum Reserve, decreased 5.9 million bbl to 426.5 million bbl for the week ended June 15, EIA said (OGJ Online, June 20, 2018). A Wall Street Journal survey done before the inventory report’s release showed analysts expected oil supplies to fall by 2.5 million bbl.
The Weekly Petroleum Status Report said US oil production for the week ended June 15 was 10.9 million b/d, unchanged from the previous week.
Meanwhile, traders and analysts expect the Organization of Petroleum Exporting Countries and other major produces will ease existing production-cut targets scheduled to expire Dec. 31. Both Saudi Arabia and Russia want increased production.
“Producers outside the Vienna group are all constrained,” said Amrita Sen, chief oil analyst at consultancy Energy Aspects. “It’s only a few countries, mainly the Saudis and Russia, who can really make a difference.”
Oil company executives discussed the possible consequences of escalating US-China trade tensions as they met with OPEC ministers in Vienna this week before a June 22 OPEC meeting.
OPEC can sell more oil to China because of import tariffs on US oil, but long-term results of the trade dispute could hit economic growth and oil demand. Both US and Chinese trade officials are discussing higher tariffs on one another’s products.
“In the long term, this will have a negative effect on the global economy even if, in the short term, it might be positive for other non-US producers,” Austrian oil company OMV’s Chief Executive Rainer Seele told Reuters on the sidelines of an OPEC seminar in Vienna.
“In the long term, [US President Donald] Trump’s policies will weigh on the global economy,” Seele said.
Total SA’s Chief Executive Patrick Pouyanne also was in Vienna where he said, “Trade wars [are] not good news for the world economy.”
Reuters reported that Scott Sheffield, executive chairman of Pioneer Natural Resource Co., also was in Vienna. “OPEC needs to fulfil its duty,” he said. “They need to put together some kind of deal to phase into the market. None of us want $80-100[/bbl] oil—that’s too high. There’s a sweet spot between $60 and $80.”
Barclays analysts issued a research note saying they expect OPEC and Russia will gradually add supplies back to the market by 2019, mostly offsetting a supply disruption of nearly 1 million b/d from Venezuela.
RBC analysts said they expect the outcome of the OPEC meeting to “dictate the outlook” for the world oil market during the second half of this year.
Energy prices
The July light, sweet crude contract on the New York Mercantile Exchange rose $1.15 to settle at $66.22/bbl on June 20. The August price gained 81¢ to $65.71/bbl.
The NYMEX natural gas price for July increased 6¢ to a rounded $2.96/MMbtu. The Henry Hub cash gas price rose 5¢ to $2.95/MMbtu on June 20.
Ultralow-sulfur diesel for July dropped 1.5¢ to a rounded $2.11/gal. The NYMEX reformulated gasoline blendstock for July decreased more than 1¢ to a rounded $2.02/gal.
Brent crude oil for August dropped 34¢ to $74.74/bbl on London’s International Commodity Exchange. The September contract decreased 31¢ to $74.33/bbl. The gas oil contract for July was $647.25/tonne, down 50¢.
OPEC’s basket of crudes averaged $72.48/bbl on June 20, up 61¢.
Contact Paula Dittrick at [email protected].
