Light, sweet oil prices settled slightly higher on the New York market July 17 after dropping to the lowest level nearly a month earlier on expectations of additional crude oil likely becoming available to world markets.
JBC Energy said traders are concerned about potential increased oil supply after hearing news reports that US President Donald Trump might order a release from the Strategic Petroleum Reserve. The SPR currently is about 270 million bbl above the required level.
Analysts said oil prices climbed late in the day July 17 on anticipation that a weekly government report would show a second consecutive decline in the US oil inventory.
The US Energy Information Administration is scheduled to release its weekly inventory report on July 18. A Wall Street Journal poll shows analysts expect a decline of 3.3 million bbl in oil supplies for the week ended July 13.
The inventory report for the week ended July 6 showed a 13 million-bbl drop to 405 million bbl—the lowest since February 2015.
The Organization of Petroleum Exporting Countries and 10 non-OPEC producers, including Russia, agreed in June to begin increasing production by as much as an estimated 1 million b/d after holding back production since Jan. 1, 2017.
Saudi Arabia is expected to account for much of the increased production. The production increase comes after supply outages in Venezuela and a threat to Iranian oil exports imposed by pending US economic sanctions.
The WSJ reported a senior US energy official said China could buy much of the Iranian oil that other nations will not because of the threat of possible US sanctions against trading partners with Iran.
Recently, US officials softened their stance on other countries who continue buying Iranian oil.
But increased Chinese purchases of Iranian oil could hinder the effectiveness of US sanctions on Iran. In addition, Iran’s relations with China could improve during escalating US-Chinese trade tensions.
President Trump in May announced a US exit from an international alliance agreement with Iran. US sanctions are expected to be implemented in November.
In other news, Intercontinental Exchange Inc. said it would launch a crude oil futures contract deliverable in Houston yet this quarter. ICE said the Permian West Texas Intermediate futures contract will provide price discovery, settlement, and delivery at Magellan Midstream Partners terminal in East Houston.
John Coleman, Wood Mackenzie Ltd. senior analyst North American crude oil markets, said coastal pricing will become more of a focus for US crude producers.
“A coastal pricing point for US light, sweet crude will be much more relevant in coming years as the US crude export story continues to unfold with export markets,” Coleman said.
As tight oil production grows, US crude producers are becoming major players in world crude markets. WoodMac estimates onshore Lower 48 production will exceed 11 million b/d by 2023.
Respectively, US exports are forecast to rise, approaching 4.5 million b/d by the early 2030s. With more than 60% of total volumes over the next decade, the Permian basin will constitute the largest percentage of US crude exports, Coleman said.
Energy prices
The New York Mercantile Exchange front-month crude oil futures contract fell to a trading session low of $67.03/bbl before recovering by settlement. The August light, sweet crude contract edged up by 2¢ to close at $68.08/bbl on July 17. The September price settled up 8¢ to $67.16/bbl.
The NYMEX natural gas price for August fell by nearly 2¢ to a rounded $2.74/MMbtu. US gas futures split direction with spot gas prices. The Henry Hub cash gas price rose 4¢ to $2.78/MMbtu.
Ultralow-sulfur diesel for August increased nearly 2¢ to a rounded $2.07/gal. The NYMEX reformulated gasoline blendstock for August rose 2¢ to a rounded $2.03/gal.
Brent crude oil for September climbed 32¢ to $72.16/bbl on London’s International Commodity Exchange. The October contract increased 42¢ to $72.24/bbl. The gas oil contract for August was $623.25/tonne, down $1.25.
The OPEC basket of crudes average price for July 17 was $70.38/bbl, down $1.52.
Contact Paula Dittrick at [email protected].
