MARKET WATCH: NYMEX light, sweet crude climbs back above $50/bbl

The front-month contract for light, sweet crude oil on the New York Mercantile Exchange jumped back up above $50/bbl during May 19 trading for the first time in more than 3 weeks as prices headed toward a second straight week of gains.

The front-month contract for light, sweet crude oil on the New York Mercantile Exchange jumped back up above $50/bbl during May 19 trading for the first time in more than 3 weeks as prices headed toward a second straight week of gains.

The incremental increases over the past several days have come as reactions to drawdowns in US crude stockpiles and optimism that the Organization of Petroleum Exporting Countries and non-OPEC producers will extend their agreement to collectively curb production into this year’s second half.

Representatives of those producers are slated to meet May 25 in Vienna. The January agreement, which expires at the end of June, calls for the reduction of about 1.8 million b/d, of which 1.2 million is to come from OPEC members. Saudi Arabia and non-OPEC Russia have said they favor extending production cuts for an additional 9 months into 2018.

Much of the market impact of the cuts thus far this year has been negated by a delayed US inventory drawdown as well as rising US production since oil prices have stabilized. More recently, however, the US Energy Information Administration has reported six consecutive weekly declines in US crude stockpiles.

US rig counts, on the other hand, continue to rise. A key indicator of future production, the tally of active oil rigs compiled by Baker Hughes Inc. increased in 17 straight weeks through the week ended May 12 (OGJ Online, May 12, 2017). BHI’s latest tally will be released at midday on May 19.

ESAI Energy believes "OPEC will indeed push the global oil balance into deficit this quarter, but the global balance slips back into surplus later this year, even with the extension," the market research firm said in a note. "The key for producers is to hold down production this summer—and in the fourth quarter—so that they will at least come close to meeting the challenge."

Energy prices

The June light, sweet crude contract on NYMEX climbed 28¢ on May 18 to close at $49.66/bbl. The July contract rose 25¢ to settle at $49.41/bbl.

The natural gas price for June dropped a penny to a rounded $3.18/MMbtu. The Henry Hub cash gas price was $3.13/MMbtu, down 3¢.

Heating oil for June gained 1.18¢ to a rounded $1.55/gal. Reformulated gasoline stock for oxygenate blending for June inched upward by a fraction of a penny to a rounded $1.61/gal.

The Brent crude contract for July on London’s ICE gained 30¢ to $52.51/bbl. The August contract was up 23¢ to $52.67/bbl. The June gas oil contract was $465/tonne, up $1.50.

OPEC’s basket of crudes on May 18 settled at $49.87/bbl, gaining 44¢.

Contact Matt Zborowski at matthewz@ogjonline.com.

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