MARKET WATCH: Brent crude oil settles above $63/bbl

Both benchmark crude oil prices gained July 22 with light, sweet oil for August settling above $56/bbl while Brent crude oil for September settled above $63/bbl as oil investors closely watch world crude supply.

Both benchmark crude oil prices gained July 22 with light, sweet oil for August settling above $56/bbl while Brent crude oil for September settled above $63/bbl as oil investors closely watch world crude supply.

US sanctions on Venezuela and Iran removed more than 1.5 million b/d of oil. The Organization of Petroleum Exporting Countries has extended supply-cut targets into 2020. US-Iran tensions are rising yet Brent crude futures have been unable to sustain prices above $65/bbl.

The Center for Strategic & International Studies in Washington, DC, issued a research note saying at least seven oil tankers have been attacked in and around the Strait of Hormuz in the last 7 weeks.

Frank Verrastro of CSIS said US and Iranian officials “both claim to have documented opposing drone assaults, and security has been bolstered in an apparent attempt to discourage further maritime interference.”

Verrastro said, “Iran has clearly signaled both its intent and ability to temporarily disrupt regional oil and energy shipments wherever and whenever it wishes.”

Moty Kuperberg, director of Oil & Gas Dynamic Shipping in Haifa, Israel, said military escorts are needed to safeguard oil vessels moving through troubled Middle Eastern straits and seaways.

“There is large enough naval force from the relevant countries that send their oil tankers to the Persian Gulf,” Kuperberg said, adding that questions remain as to which country might emerge as the leader of crisis management.

“Against some regular voices that fear from an oil shock, it should be quite clear to any consumer of Arabian Gulf oil and gas, and to any trader, that prices will stay stable as they did in the last couple months,” Kuperberg said.

“Brent at low $60s/bbl and [West Texas Intermediate] below the $60/bbl is a good sign for the market even under the shadow of continuous threats in the Persian Gulf,” Kuperberg said. “Nevertheless, a worse case scenario may still be around the corner, which the market must enter with a clear attitude not to let Brent climb over $70/bbl,” Kuperberg said.

Helima Croft, global heard of commodity strategy for RBC Capital Markets LLC, said a series of provocations involving various vessels and the Iranian Revolutionary Guards Corp. naval forces could push the Middle East “closer to a full-blown crisis.”

Croft said, “We believe that oil prices have become a broken barometer for gauging the rising pressure in the region and are now much more of a lagging risk indicator. Consumed with concerns about trade wars and demand destruction, many market participants view the attacks in the Straits of Hormuz as geopolitical background noise that will not rise to the level of a major supply disruption or a military conflict.”

Croft suggests oil market participants “could soon witness the test case for whether $80/bbl Brent has become the new geopolitical risk ceiling price.”

Energy prices

Light, sweet crude oil on the New York Mercantile Exchange for August delivery added 59¢ to settle at $56.22/bbl on July 22 while the September contract increased 46¢ to $56.22/bbl.

NYMEX natural gas for August gained 6¢ to a rounded $2.31/MMbtu.

Ultralow-sulfur diesel for August edged up nearly 1¢ to a rounded $1.90/gal. The NYMEX reformulated gasoline blendstock for August fell 1¢ to a rounded $1.83/gal.

Brent crude for September gained 79¢ to $63.26/bbl. The October price increased 75¢ to settle at $63.03/bbl.

The gas oil contract for August rose $8.75 to $584.75/tonne on July 22.

The average for OPEC’s basket of crudes was $64.27/bbl on July 22, down $1.34.

Contact Paula Dittrick at pdittrick@endeavorb2b.com.

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