MARKET WATCH: NYMEX oil prices fall on rise in US rig count

US light, sweet crude oil prices edged down going into the July 4 holiday weekend on the New York market after Baker Hughes Inc. reported July 2 that the US onshore rig count jumped by 12 rigs drilling for oil and also upon uncertainty about Iran’s July 7 deadline for a nuclear accord.

The overall count, up 3 units to 862 during the abbreviated business week ended July 2, has now gained 5 units over the past 2 weeks following 28 consecutive weeks of losses (OGJ Online, July 2, 2015). The US remains down 1,012 rigs compared with the same week a year ago.

Analysts noted the rig total represents 60% fewer rigs working than since last year’s peak of 1,609 in October.

Deutsche Bank analysts believe US shale oil production will decline over coming months and likely decline going into 2016. They expect only a shallow production decline despite a lower rig count compared with 2014 rig counts, noting efficiency gains in unconventional production methods.

Regarding Iran, US Sec. of State John Kerry negotiated with Iranian Foreign Minister Mohammad Javad Zarif through the July 4 weekend in an effort to reach an agreement by July 7.

“At this point negotiations could go either way,” Kerry said. “If hard choices get made in the next couple of days and made quickly, we could get an agreement this week. But if they are not made, we will not.”

US officials and Western allies are trying to secure an accord that could prevent Iran from obtaining a nuclear weapon. In exchange sanctions against Iran would be lifted, and Iranian oil eventually would return to the world markets if an agreement were to be reached.

US President Barack Obama has said he is ready to walk away from the talks unless an acceptable deal is reached.

Separately, Barclays analysts said world oil traders were concerned about Petroleo Brasileiro SA (Petrobras), which has reduced its expected future production from giant offshore Lula oil field due to delays in platform completions.

Petrobras is the operator in Lula in a partnership with Galp Energia SGPS SA (OGJ Online, May 12, 2014).

In the past year, forecasts of Brazilian crude oil production by 2020 have been cut along with downward revisions to medium-term output growth in Iraq, Barclays analysts said.

Energy prices

The August crude oil contract on the New York Mercantile Exchange edged down 3¢ on July 2 to $56.93/bbl. The September contract dropped 7¢ to $57.30/bbl. US markets were closed on July 3 in observance of the July 4 holiday.

The natural gas contract for August was up nearly 4¢ to a rounded $2.82/MMbtu. The Henry Hub, La., gas price was $2.79/MMbtu, down 2¢.

Heating oil for August edged up less than a penny to remain at a rounded $1.84/gal. The price for reformulated gasoline stock for oxygenates blending for August dropped 2.75¢ to a rounded $2.03/gal.

The August ICE contract for Brent crude rose 6¢ to $62.07/bbl on July 2, while the September contract gained 10¢ to $62.57/bbl. The ICE gas oil contract for July climbed $2 to $574.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for July 2 was $58.99/bbl, down 48¢. The basket price for July 3 was $58.05/bbl, down 94¢.

Contact Paula Dittrick at paula@ogjonline.com.

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

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