MARKET WATCH: Oil prices gain before US Independence Day holiday

The light, sweet crude oil contract for August delivery gained slightly to settle above $74/bbl on July 3 while Brent crude oil for September delivery gained modestly in London to remain above $77/bbl. US markets were closed July 4 for the Independence Day holiday.

Reuters reported that Iran’s President Hassan Rouhani on July 2 hinted at threats to disrupt oil shipments from neighboring countries if US officials were to force all countries to stop buying Iranian oil.

Rouhani made comments on Iran’s presidential web site, and he partially repeated those comments at a news conference in Switzerland, although Reuters said the comments could be open to interpretation.

When asked whether he intended to make a threat, Rouhani declined to clarify. Iranian officials in the past have threatened to block oil shipments through the Strait of Hormuz in retaliation for US action against Iran.

US President Donald Trump previously indicated he would use US trade tariffs if necessary against Iran’s trading partners to discourage them from buying Iranian oil.

Trump in May announced a US exit from an international agreement that resulted in the lifting of nuclear-related sanctions against Iran. Unilateral US sanctions are expected to be imposed on Nov. 4, resulting in decreased oil exports from Iran.

Consequently, Iran is expected to slow its oil production. Analysts’ estimates vary widely on the volume of Iran’s future oil supply to world markets.

Meanwhile, the Organization of Petroleum Exporting Countries and 10 other oil producers, including Russia, agreed on June 22 to stop overcompliance with production-cut targets, which analysts say means that Saudi Arabia and Russia will boost oil production.

The countries did not discuss quotas for individual countries but said the group decided to collectively comply 100% with existing production-cut targets but no more than that.

The Wall Street Journal reported Russia produced 10.97 million b/d in May, about 60,000 b/d above the level that it agreed to in 2016. WSJ cited Russia Energy Ministry statistics.

Russian Energy Minister Alexander Novak has said Russia hopes to boost production by 200,000 b/d. Goldman Sachs analysts estimate Russia’s spare capacity at 500,000 b/d.

Separately, Libya’s oil exports have been hindered again by militia attacks. Libya’s National Oil Co. declared force majeure on loadings from some of its ports, saying up to 850,000 b/d has been shut in.

“In the very short term our expectations are for Brent to climb back over $80[/bbl], Libya being a key factor,” said Harry Tchilinguirian, BNP Paribas senior oil strategist.

Energy prices

The August light, sweet crude contract rose 20¢ to settle at $74.14/bbl on July 3. The September price was down 8¢ to $71.59/bbl.

The NYMEX natural gas price for August edged up less than 1¢ to a rounded $2.87/MMbtu. The Henry Hub cash gas price held unchanged at $2.87/MMbtu on July 3.

Ultralow-sulfur diesel for August increased 8¢ to a rounded $2.16/gal. The NYMEX reformulated gasoline blendstock for August gained 1¢ to a rounded $2.12/gal.

Brent crude oil for September increased 46¢ to $77.76/bbl on London’s International Commodity Exchange. The October contract gained 43¢ to $77.41/bbl. The gas oil contract for July was $656.25/tonne, down $7.25.

The OPEC basket of crudes average price for July 3 was $74.62/bbl, down 66¢.

Contact Paula Dittrick at [email protected].