Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first rise in US crude inventories in 9 weeks.
Uncertainty continued on world oil markets because international powers granted Iran an extension, as expected, to reach a nuclear agreement.
The US Energy Information Administration said in its Weekly Petroleum Status Report that commercial crude oil inventories, excluding the Strategic Petroleum Reserve, increased 2.4 million bbl for the week ended June 26 compared with the previous week (OGJ Online, July 1, 2015).
Some analysts attributed the oil and products inventory build to higher US oil imports after Tropical Storm Bill and a rebound in Canadian production levels following June wildfires.
“We’ve been expecting prices to remain in this sub-$60[/bbl] range,” said Michael Cohen, Barclays oil analyst at Barclays. He expects US light, sweet crude oil will average $55/bbl during the third quarter.
Production has slowed, but Cohen noted that, “It’s definitely not the…hole dropping out from under onshore production as many expected.”
EIA on July 2 estimated working gas in underground storage across the Lower 48 at 2.57 tcf as of June 26, which was a net increase of 69 bcf from the previous week. Stocks were 662 bcf higher than last year at this time, and 29 bcf above the 5-year average of a rounded 2.55 tcf, the Gas Storage Report showed.
Regarding Iran, an extension was granted from June 30 to July 7. US President Barack Obama said he will reject any deal unless Iran accepts tight monitoring on its nuclear program. Completion of an accord would result in a lifting of sanctions so that Iran eventually could resume selling its oil on world markets.
The August crude oil contract on the New York Mercantile Exchange plummeted $2.51 on July 1 to $56.96/bbl, which was the lowest closing price since Apr. 8. The September contract dropped $2.46 to $57.37/bbl.
The natural gas contract for August was down nearly 5¢ to a rounded $2.78/MMbtu. The Henry Hub, La., gas price was $2.81/MMbtu, up 4¢.
Heating oil for August fell 5¢ to a rounded $1.84/gal. The price for reformulated gasoline stock for oxygenates blending for August dropped 4¢ to a rounded $2.07/gal.
The August ICE contract for Brent crude decreased $1.58 to $62.01/bbl, while the September contract dropped $1.67 to $62.47/bbl. The ICE gas oil contract for July fell $1.50 to $572.25/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for July 1 was $59.47/bbl, up 68¢.
Contact Paula Dittrick at email@example.com.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.