Light, sweet crude oil contracts for July and August plunged by more than $3.50/bbl on May 23, marking the sharpest single-session drop since Dec. 24, 2018, and the lowest settlement since Mar. 12.
Brent crude oil prices also fell more than a $3/bbl on the London market with the July contract settling under $68/bbl. Analysts attributed the steep benchmark price drops on US-China trade relations as well as rising US oil supplies.
The US Energy Information Administration estimates commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased by 4.7 million bbl for the week ended May 17 (OGJ Online, May 23, 2019).
Meanwhile, US President Donald Trump on May 23 said US complaints against Huawei Technologies Co. Ltd. might be resolved within an anticipated US-China trade deal. Trump also called the Chinese telecommunications giant “very dangerous.”
US officials already imposed trade restrictions that effectively ban US firms from doing business with Huawei, the world’s largest telecom network gear maker, citing national security concerns.
“You look at what they’ve done from a security standpoint, from a military standpoint, it’s very dangerous,” Trump said. “If we made a deal, I could imagine Huawei being possibly included in some form or some part of it.”
Separately, ESAI Energy said US and Iran officials “remain on a collision course in terms of policy,” even though Trump has said he does not want a war with Iran.
“Each side is also building up and moving military forces in the Persian Gulf-North Arabian Sea-Red Sea area, increasing chances for clashes due to misperceptions or accidents,” ESAI Energy said in a May 22 note.
“A larger-scale military clash between Iran and the United States would have significant short and long-term effects on the stability of the region as well as for oil production and export from numerous countries,” ESAI Energy added.
Energy prices
Crude oil on the New York Mercantile Exchange for July fell $3.51/bbl to settle at $57.91/bbl on May 23 while the August contract also fell $3.51 to settle at $57.99/bbl.
NYMEX natural gas for June rose 3.5¢ to settle at a rounded $2.58/MMbtu.
Ultralow-sulfur diesel for June declined nearly 9¢ to a rounded $1.96/gal. The NYMEX reformulated gasoline blendstock for June dropped 8¢ to a rounded $1.91/gal.
Brent crude for July was down by $3.23 to $67.76/bbl. The August price decreased $3.49 to settle at $66.50/bbl.
The gas oil contract for June fell $25 to $607.50/tonne on May 23. The average for the Organization of Petroleum Exporting Countries’ basket of crudes was $68.56/bbl on May 23, down $2.47.
Contact Paula Dittrick at [email protected].
