The price of Brent crude oil for September fell more than $5/bbl on the London market July 11 while the light, sweet crude oil price for August delivery fell by more than $3.70/bbl on the New York market upon news reports of resuming Libyan exports and the US-China trade dispute.
“The market’s move lower…seemed quite extreme,” Warren Patterson, an ING commodities strategist, told the Wall Street Journal. “It ignored the biggest US crude drawdown since September 2016.”
The US Energy Information Administration reported crude oil inventories, excluding the Strategic Petroleum Reserve, decreased 12.6 million bbl for the week ended July 6 to an estimated 405.2 million bbl (OGJ Online, July 12, 2018).
The Weekly Petroleum Status Report said US production held unchanged at 10.9 million b/d.
Separately, Barclays analysts on July 10 said they revised their Brent forecast for the second half to $73/bbl, up about $3/bbl from the firm’s previous forecast.
Brent front-month crude prices ranged $77-80/bbl during July until the steep decline on July 11, which was its biggest single-day decline in more than 2 years.
Barclays forecast 2019 Brent crude will average $71/bbl. Barclays revised its Brent forecast based on lower oil supply from Libya. The revised forecast also cited anticipated lower oil exports and production from Iran, which faces unilateral US sanctions starting Nov. 4.
Libya announced plans to reopen four ports that had been closed because of threats from armed rebels starting in June (OGJ Online, July 11, 2018). This means the resumption of oil exports although it’s yet unclear when that oil will reach world markets.
The market underestimates spare capacity available from Saudi Arabia, Russia, Kuwait and UAE, Barclays said.
Oil traders and investors “ought to beware of Saudi Arabia and Russia’s clear willingness to cap the upside in prices,” said analyst Michael Cohen of Barclays’ New York office. “As prices rise to higher levels, the air is growing thin and oil demand is already faltering.”
Other forecasts indicate oil prices will remain higher than Barclays suggests. Morgan Stanley recently raised its 6-month outlook for Brent to $85/bbl. Goldman Sachs previously forecast Brent crude will peak at $82.50/bbl by late August.
Energy prices
The August light, sweet crude contract fell $3.73 to settle at $70.38/bbl on July 11. The September price dropped $3.70 to $68.86/bbl.
The NYMEX natural gas price for August rose 4¢ to a rounded $2.83/MMbtu. The Henry Hub cash gas price held unchanged at $2.84/MMbtu.
Ultralow-sulfur diesel for August decreased 1¢ to a rounded $2/gal. The NYMEX reformulated gasoline blendstock for August fell 10¢ to a rounded $2.06/gal.
Brent crude oil for September decreased $5.46 to $73.40/bbl on London’s International Commodity Exchange. The October contract dropped $5.29 to $73.33/bbl. The gas oil contract for July was $674.75/tonne, down $4.
The OPEC basket of crudes average price for July 11 was $74.40, down $1.94.
Contact Paula Dittrick at [email protected].
