MARKET WATCH: Crude prices drop ahead of OPEC, non-OPEC meeting in Russia

Crude oil prices on markets in New York and London declined on July 20 and into July 21, shedding the momentum that propelled them to 6-week highs earlier in the week.

Crude oil prices on markets in New York and London declined on July 20 and into July 21, shedding the momentum that propelled them to 6-week highs earlier in the week.

Brent briefly rose above $50/bbl early on July 20 as the market continued to react to news of another inventory draw in the US. But the warm steak cooled as traders were reminded of the many variables still needed to bring the market back into the balance.

Members of the Organization of Petroleum Exporting Countries and representatives of some non-OPEC producers are slated to meet July 24 in St. Petersburg, Russia, to discuss their ongoing implementation of an agreement to collectively curb output by about 1.8 million b/d through March 2018.

Industry leaders from those countries will likely discuss weakening compliance among OPEC members in the agreement as well as whether to address rising output from Libya and Nigeria, which are excluded from the agreement.

Compliance among OPEC members slipped in June to 78% from 95% in May, while the non-OPEC group’s production stood at 82% in June, the International Energy Agency reported last week (OGJ Online, July 13, 2017).

Ecuador Oil Minister Carlos Perez said his country will no longer limit its output. Among the smaller OPEC producers, the country agreed to cut its output by 26,000 b/d but has only trimmed it by 16,000 b/d, Perez said. Its current production is 545,000 b/d.

Libya production rose month-over-month in June by 127,000 b/d to 852,000 b/d, while Nigeria output gained 97,000 b/d during the month to 1.73 million b/d, according to secondary sources in OPEC’s July Oil Market Report. Overall OPEC production averaged 32.61 million b/d, an increase of 393,000 b/d over the previous month.

Mustafa Sanalla, chairman of Libya’s state-owned National Oil Corp., said he will attend a July 22 technical committee meeting in St. Petersburg to share his country's production plans.

“We will take this opportunity to share with the committee the factors enabling and constraining Libya’s production recovery,” Sanalla explained in a statement earlier this week. “I will consult with significant Libyan decision-makers before I leave and hope to present a unified Libyan position in St. Petersburg that will show we can act together in the national interest.”

Nigeria Oil Minister Emmanuel Ibe Kachikwu said he will not be in St. Petersburg.

In the US, traders and market observers await Baker Hughes’ release of its weekly US rig count at midday, seen as a primary indicator of future production. Growth in oil-directed rigs has fallen in recent weeks (OGJ Online, July 14, 2017).

Energy prices

The August light, sweet crude contract on NYMEX declined 33¢ on July 20 to settle at $46.79/bbl. The September contract dropped 40¢ to close at $46.92/bbl.

The NYMEX natural gas price for August decreased 2.3¢ to a rounded $3.04/MMbtu. The Henry Hub cash gas price was unchanged from a day earlier at $3.10/MMbtu.

Heating oil for August dropped by less than a penny to a rounded $1.54/gal. Reformulated gasoline stock for oxygenate blending for August fell by a little more than a penny to a rounded $1.61/gal.

The Brent crude contract for September on London’s ICE declined 40¢ to $49.30/bbl. The October contract was down 41¢ to $49.52/bbl. The August gas oil contract rose $7.50 to $463.50/tonne.

OPEC’s basket of crudes on July 20 was $47.48/bbl, up 63¢.

Contact Matt Zborowski at matthewz@ogjonline.com.

More in General Interest