MARKET WATCH: NYMEX, Brent crude oil prices split directions after US inventory

Light, sweet crude oil prices gained 4¢/bbl on New York market to settle at $48.36/bbl June 1 while Brent crude oil prices fell by more than 10¢/bbl on the London market.

Light, sweet crude prices fell in early June 2 trading. Earlier in the week, the US benchmark briefly dropped below $48/bbl but recovered to settle above that mark.

US crude oil stocks fell for the week ended May 26, the eighth straight weekly drop, the US Energy Information Administration reported. US gasoline and distillates inventories were mixed. Meanwhile, recent US production was at its highest since August 2015.

Geoffrey Craig, S&P Global Platts oil futures editor, said market participants watched the US inventory closely following a decision by the Organization of Petroleum Exporting Countries and non-OPEC countries to extend oil production-cut targets into 2018.

Saudi Arabia oil officials claim the reduced production levels by some major producers is working to gradually reduce ample world oil supplies despite rising US oil production.

Ole Hansen of Saxo Bank said, “OPEC and non-OPEC producers went into the recent meeting in Vienna with the objective of maintaining market stability. They were operating in the belief that a seasonal rise in demand during the second half would help accelerate the reduction in global supplies.”

But Hansen said weakness following the OPEC and non-OPEC alliance’s announcement shows “how the market has been growing increasingly impatient.” Hansen added, “The risk of reduced compliance during the coming months remains elevated while the lack of an exit strategy post-first quarter 2018 also poses a challenge.”

For the week ended May 26, US oil production was 9.342 million b/d, up 22,000 b/d, the Weekly Petroleum Status Report said. Production across the Lower 48 was 8.835 million b/d, up 20,000 b/d. Alaska’s production was up 2,000 b/d.

EIA inventory statistics released June 1 showed US crude stocks decreased 6.428 million bbl for the week ended May 26, about double what many analysts had expected. It was the eighth straight weekly decline (OGJ Online, June 1, 2017).

At 509.9 million bbl, crude supplies remain 102.7 million bbl above the 5-year average for this time of year.

S&P Global Platts’ Craig said the primary engine behind recent US crude oil drawdowns has been refinery utilization, not falling imports. During the last 8 weeks, imports averaged 8.169 million b/d compared with 7.728 million b/d during the same year-ago period.

US crude imports fell 309,000 b/d last week to 7.985 million b/d with imports from Saudi Arabia nearly flat at 1.362 million b/d.

“Market participants will be tracking Saudi imports closely in the weeks ahead. Saudi Arabia’s Energy Minister Khalid al-Falih said in Vienna last week that exports to the US should decline,” Craig said. “Imports from Kuwait decreased 250,000 b/d last week to 228,000 b/d, and imports from Mexico were down 103,000 b/d to 702,000 b/d.”

Energy prices

The July light, sweet crude contract on the New York Mercantile Exchange gained 4¢ to $48.36/bbl on June 1. The August contract also rose 4¢ to close at $48.60/bbl.

The natural gas price for July dropped 6¢ to a rounded $3/MMbtu. The Henry Hub cash gas price was $2.93/MMbtu, down 7¢.

Heating oil for July dropped nearly 2¢ to a rounded $1.50/gal. Reformulated gasoline stock for oxygenate blending for July rose less than a penny to $1.60/gal.

The Brent crude contract for August on London’s ICE dropped 13¢ to $50.63/bbl on June 1. The August contract fell 12¢ to $50.97/bbl. The June gas oil contract was $445.50/tonne on June 1, up $4.75.

OPEC’s basket of crudes on June 1 settled at $48.85/bbl, up 16¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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