MARKET WATCH: Front-month crude oil price drops to lowest settlement since April

Light, sweet crude oil prices dropped more than $1/bbl on the New York and London markets July 15, dipping to their lowest settlement since early April on concerns about Iranian oil eventually adding to an already oversupplied world oil market.

An agreement between Iran and international powers, if approved, could result in an eventual lifting of sanctions against Iran although the timing of that remains uncertain.

Michael Wittner of Societe Generale said he believes Iranian crude exports would not start until next year, saying it could take 4-12 months for sanctions to be lifted, and for exports to resume, which is likely to occur in phases.

“The volumes won’t be significant until mid-2016, perhaps not until the second half,” Wittner said. “At that point, the global market will be balanced, and able to absorb Iranian volumes without a bearish impact on the markets.”

But other analysts said Iranian crude could delay an oil-price recovery. BMI Research, a unit of Fitch, noted Saudi Arabia has added more than 1 million b/d to world oil supplies since December 2014.

“Considering the existing large oversupply in 2015, the return of Iranian oil volumes to the market will delay a rebalancing in the fundamental global oil markets in 2016,” said BMI Research analysts.

Regarding natural gas in underground storage across the Lower 48, the US Energy Information Administration estimated working gas in storage at 2.767 tcf as of July 10, which was a net increase of 99 bcf from the previous week. Stocks were 653 bcf higher than last year at this time and 73 bcf above the 5-year average of 2.694 tcf, EIA’s Gas Storag Report said.

Energy prices

The August crude oil contract on the New York Mercantile Exchange dropped $1.63 on July 15 to settle at $51.41/bbl. The September contract dropped $1.69 to $51.79/bbl.

The natural gas contract for August was up nearly 8¢ to a rounded $2.92/MMbtu. The Henry Hub, La., gas price was $2.92/MMbtu, down 3¢.

Heating oil for August rose dropped 5.6¢ to a rounded $1.67/gal. The price for reformulated gasoline stock for oxygenates blending for August fell 7¢ to a rounded $1.86/gal.

The August ICE contract for Brent crude declined $1.46 to $57.05/bbl on July 15, while the September contract was down $1.56 to $57.12/bbl. The ICE gas oil contract for August fell $5.75 to $523.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes for July 15 was $54.94/bbl, up 39¢.

Contact Paula Dittrick at paula@ogjonline.com.

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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