MARKET WATCH: Crude oil prices rebound by $2/bbl on OPEC forecast

The light, sweet crude oil price for August delivery rallied by more than $2/bbl on July 12 as did the Brent crude oil price on the London market. The Organization of Petroleum Exporting Countries issued a report July 12 saying non-OPEC production will fall more than OPEC previously expected.

Separately, analysts and traders anticipated the US government’s weekly oil and product inventory report for the week ended July 8 will show a continued decline in crude oil supplies. That report was scheduled for release on July 13.

In its Monthly Oil Market report, OPEC forecast non-OPEC production will fall 880,000 b/d to 56.03 million b/d during 2016 compared with 2015. The expected decline is larger than previously forecast because of reduced Canadian oil sands production after wildfires earlier this year and also from US production declines.

The UK’s vote to leave the European Union could hinder global economic growth and oil demand, notably in Europe during 2017, OPEC said, adding that European oil demand “faces substantial downside risks…as a result of uncertainties related to the region’s economy.”

Non-OPEC oil supply in 2017 was forecast to decline by 100,000 b/d to average 55.9 million b/d.

“Brazil and Canada are the main drivers of growth next year while Mexico, US, and Norway are expected to see declines,” OPEC said.

Energy prices

The crude oil contract for August on the New York Mercantile Exchange rose $2.04 on July 12 to settle at $46.80/bbl. The September contract climbed $2.05 to $47.57/bbl.

The natural gas contract for August was up 3¢ to a rounded $2.73/MMbtu. But US cash prices declined. The Henry Hub gas price was $2.75/MMbtu, down 10¢ on July 12.

Heating oil for August delivery rose nearly 5¢ to $1.46/gal. The price for reformulated gasoline stock for oxygenates blending for August rose 4.6¢ to a rounded $1.43/gal.

The September Brent crude contract on London’s ICE climbed $2.22 on July 11 to $48.47/bbl. The contract for October increased $2.15 to $49.05/bbl. The August gas oil contract settled at $423.50/tonne, up $8.25.

The average price for OPEC’s basket of 12 benchmark crudes was $43.22 on July 12, up $1.01.

Contact Paula Dittrick at paulad@ogjonline.com.

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