MARKET WATCH: Oil prices drop on New York, London markets

Light, sweet crude prices for August and September delivery each dropped more than $1.50/bbl on the New York market June 30, reversing the previous day’s gains in a volatile week for commodity prices. The downward momentum continued in early July 1 trading.

Uncertainty in financial markets follows the UK’s June 23 referendum vote to leave the European Union. Barclays Research analysts believe the uncertainty will dampen oil demand, which already was weakening this year.

“The UK leave vote has added another nail to the coffin for global oil demand in 2016,” Barclays said June 30. “The path of oil prices is likely to track the political uncertainty in the months ahead.”

Barclays revised its 2016 world demand growth estimate to 1.1 million b/d from 1.2 million b/d. The analysts also reduced Barclays 2017 oil demand forecast to 1.2 million b/d from 1.3 million b/d.

“We remain bullish for 2017,” Barclays said in its July 1 Blue Drum note. “The elusive market rebalancing continues to get pushed further in to the future; however, now that the market is poised to spend at least another quarter at low prices, the upswing (in our view during first-quarter 2017) is likely to be more violent.

Meanwhile, government statistics showed US oil production numbers falling.

The US Energy Information Administration reported crude oil production for the week ended June 24 at 8.6 million b/d, down 55,000 b/d from the previous week, the Petroleum Status Report said.

Baker Hughes Inc. was expected to release its weekly rig count later on July 1.

Jason Gammel, analyst at Jefferies, said, “We believe that the fundamentals of the oil market remain favorable for continued price recovery.” He expects global inventories will begin to decline in the third quarter.

EIA estimated natural gas in underground storage across the Lower 48 at 3.14 tcf as of June 24, a net increase of 37 bcf from the previous week. Stocks were 582 bcf higher than last year at this time, the Gas Storage Report said.

AAA expects it more than 36 million Americans to travel by car during the Independence Day weekend, up 1.2% from last year. AAA said the holiday travel started June 29.

Energy prices

The crude oil contract for August on the New York Mercantile Exchange fell $1.55 on June 30 to settle at $48.33/bbl. The September contract dropped $1.57 to $49.01/bbl.

The natural gas contract for August gained 6¢ to close at a rounded $2.92/MMbtu. The Henry Hub gas price was $2.90/MMbtu, down 3¢.

Heating oil for July delivery declined 5¢ to a rounded $1.49/gal. The price for reformulated gasoline stock for oxygenates blending for July was down 2¢ to a rounded $1.50/gal.

The August Brent crude contract on London’s ICE dropped 93¢ on June 30 to $49.68/bbl. The contract for September declined $1.61 to $49.71/bbl. The July gas oil contract fell $7.50, settling at $442.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on June 30 was $46.27/bbl, up 45¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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