US crude oil prices settled above $50/bbl for the first time in about 2 months on July 31, which analysts attributed to a combination of issues including a sharply lower US oil inventory for the week ended July 21.
“The US data does show much stronger-than-expected demand and rapidly declining inventory,” said Paul Horsnell, Standard Chartered head of commodity research. “It is clear that Saudi Arabia is still reducing exports and is still committed to rebalancing the market.”
The Organization of the Petroleum Exporting Countries and some non-OPEC countries, including Russia, agreed in late 2016 to production-cut targets to support oil prices. Saudi Arabia recently urged other countries to comply with that agreement, which now extends into 2018.
Separately, tensions rose in Venezuela where a weekend vote to elect a new assembly sparked violent protests. Analysts said the unrest raised concerns that Venezuela’s oil exports could decrease.
US President Donald Trump’s administration said July 31 that it was imposing financial sanctions because the weekend election gave Venezuela President Nicolas Maduro’s party nearly unlimited power.
The US Treasury Department's Office of Foreign Assets Control announced the sanctions against Maduro in a brief statement. The Trump administration previously warned the socialist government that new penalties would come if Maduro went ahead with the assembly election.
Commerzbank analysts noted that “further turmoil would presumably influence production and transport.”
Helima Croft, RBC Capital Markets LLC’s global head of commodity strategy, said that by Dec. 31, 2017, the Venezuelan economy likely will have shrunk by 30% in 3 years.
“Oil has been a clear casualty of the crisis with production trending steadily downward due to the state oil company PDVSA’s inability to obtain diluents, maintain health and safety standards at facilities, and pay service companies and employees,” Croft said.
She said the Trump administration reportedly is considering banning Venezuelan oil imports.
“Such a scenario could create unintended negative consequences,” for US citizens such as higher gasoline prices to risking jobs, she said.
Energy prices
The September light, sweet crude contract on the New York Mercantile Exchange gained 46¢ on July 31 to settle at $50.17/bbl. The October contract added 45¢ to close at $50.26/bbl.
The NYMEX natural gas price for September declined by nearly 15¢ to a rounded $2.79/MMbtu. The Henry Hub cash gas price fell 8¢ to $2.84/MMbtu.
Heating oil for August gained 1¢ to a rounded $1.65/gal. Reformulated gasoline stock for oxygenate blending for August rose nearly 3¢ to a rounded $1.70/gal.
The Brent crude contract for September on London’s ICE gained $1.16 to $52.65/bbl. The October contract was up $1.20 to $52.72/bbl.
The August gas oil contract gained $4 to $489/tonne. OPEC’s basket of crudes on July 31 was $49.97/bbl, up 51¢.
Contact Paula Dittrick at [email protected].
