MARKET WATCH: Brent crude stays above $50/bbl on production freeze talk

Brent crude oil prices for October delivery rose by more than $1 on the London market Aug. 18 to close at nearly $51/bbl while light, sweet crude oil prices on the New York market rose by more than $1.40 to settle above $48/bbl.

Analysts attributed the rally to reduced US oil and gasoline inventories, declining Chinese oil demand, and indications that members of the Organization of Petroleum Exporting Countries along with some non-OPEC producers were ready to discuss measures that could stabilize prices.

Analysts on Aug. 19 awaiting the weekly Baker Hughes Inc. US rig count. Previously, US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, fell 2.5 million bbl for the week ended Aug. 12, the US Energy Information Administration reported (OGJ Online, Aug.17, 2016).

Morgan Stanley issued a note saying Chinese gasoline demand appears to be slowing so its crude oil imports are likely to decline.

Nigerian Oil Minister Emmanuel Ibe Kachikwu said Aug. 18 that a cut in OPEC production is unlikely although he believes an informal meeting of OPEC producers during a September energy conference in Algeria could support crude prices.

“Are we cutting volumes? I don’t see that happening,” Kachikwu told reporters. During a speech in Lagos, Kachikwu said Nigeria’s production has fallen to 1.56 million b/d because of militant attacks.

US natural gas futures prices rose for most of the week.

EIA estimated natural gas in underground storage across the Lower 48 at a rounded 3.34 tcf as of Aug. 12, a net increase of 22 bcf from the previous week.

Gas supplies were 327 bcf higher than for the same period last year and 405 bcf above the 5-year average of a rounded 2.93 tcf, the Gas Storage Report said.

Raymond James & Associates analysts storage levels could reach “close to 4 tcf” by Dec. 31.

“Still, as market supply and demand fundamentals appear to be improving, we expect that the market could look past 2016's likely high, but still workable, storage levels and focus on improving trends in 2017 to lead to higher gas prices,” RJA said in a research note.

Energy prices

The NYMEX crude oil contract for September gained $1.43 to close at $48.22/bbl on Aug. 18. The October contract climbed $1.37 to close at $48.89/bbl.

The natural gas contract for September rose 5.5¢ to a rounded $2.67/MMbtu. On the spot market, the Henry Hub gas price remained unchanged at $2.71/MMbtu.

Heating oil for September gained nearly 4¢ to a rounded $1.53/gal. The price for reformulated gasoline stock for oxygenates blending for September rose nearly 4¢ to a rounded $1.49/gal.

The Brent crude contract for October on London’s ICE rose $1.04 to settle at $50.89/bbl. The contract for November was up $1.07 to $51.15/bbl. The September gas oil contract settled at $442.25/tonne on Aug. 18, up $12.25.

The average price for OPEC’s basket of 12 benchmark crudes was $46.50/bbl on Aug. 18, up $1.16.

Contact Paula Dittrick at paulad@ogjonline.com.

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