MARKET WATCH: NYMEX, Brent oil price end volatile week with mild gains

Crude oil prices closed with modest gains July 8 on the New York and London markets, ending a volatile week after light, sweet crude and Brent crude dropped more than $2/bbl on July 5 and July 7. Analysts attributed price swings to an uncertain global economic outlook and a rising US rig count.

During intraday trading, the Brent crude oil price for September delivery touched a low of $46.15/bbl, the front-month contract’s lowest since May 11. Brent recovered July 8 to settle up 36¢ to $46.76/bbl.

Analysts blamed anxiety about the UK vote to leave the European Union for what proved to be the worse weekly performance for Brent since January.

Meanwhile, Baker Hughes Inc. reported the number of active US drilling rigs gained 9 units to 440 for the week ended July 8, marking the fifth time in 6 weeks the overall count has risen.

BHI also reported that the US rig count in June averaged 417 rigs working, up 9 from the May average and down 444 from the June 2015 average (OGJ Online, July 8, 2016).

Raymond James & Associates Inc. issued a research note saying European natural gas demand already was languishing near 20-year lows before the UK referendum.

“It is no secret that US natural gas demand has chronically disappointed expectations in recent years, especially in the industrial sector,” said Pavel Molchanov of RJA, adding that the European gas demand is looking even worse.

“In our Stat of the Week from July 2015, we highlighted some shockingly negative statistics about the European gas market: in particular, 2014 being the lowest point for EU gas consumption since 1995.”

Although EU gas demand showed some recovery during 2015, Mlchanov said, “The overall picture is still glaringly bearish. To be clear, this is not because of the Brexit referendum’s outcome, but rather underlying long-term trends that go well beyond day-to-day politics. The epic weakness in European gas demand carries read-through not just for energy companies in the region, but also the entire global LNG value chain.”

He said EU gas consumption is near the lowest level since the mid-1990s. RJA reached that conclusion by using 1990-2015 information from the BP Statistical Review of World Energy to aggregate gas consumption and production for all current EU members plus Norway and Switzerland.

Energy prices

The crude oil contract for August on the New York Mercantile Exchange gained 27¢ on July 8 to settle at $45.41/bbl. The September contract added 28¢ to $46.12/bbl.

The natural gas contract for August was up 2¢ to a rounded $2.80/MMbtu. The Henry Hub gas price was $2.77/MMbtu, down 8¢ on July 8.

Heating oil for August delivery rose a fraction of a penny to remain at a rounded $1.41/gal. The price for reformulated gasoline stock for oxygenates blending for August was up 7.7¢ to a rounded $1.37/gal.

The October Brent crude contract on London’s ICE increased 38¢ to $47.38/bbl. The July gas oil contract for July 8 dropped to $407.25/tonne, down $10.75.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was $42.58/bbl on July 8, down $1.60.

Contact Paula Dittrick at paulad@ogjonline.com.

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