The US benchmark crude oil futures contracts for July and August delivery edged down less than 10¢ on the New York market on June 8, settling under $46/bbl for a second consecutive day but stabilizing after oil prices dropped more than $2/bbl on June 7.
Ole Hansen, head of commodity strategy for Saxo Bank, said oil market participants focused more on oil supply than on an emerging geopolitical crisis in the Middle East.
“US inventories of oil and fuel surprisingly jumped and reverted to a 3-month high, while output from Nigeria and Libya continued to improve,” Hansen said.
The increase in US oil stocks made some analysts question if the Organization of Petroleum Exporting Countries could meet its goal of reducing global stocks to the 5-year average.
US commercial crude inventories, excluding the Strategic Petroleum Reserve, increased nearly 3.3 million bbl for the week ended June 2 compared with the previous week, the US Energy Information Administration said in its Weekly Petroleum Status Report.
EIA estimated the latest US crude inventory total at 513.2 million bbl, which is in the upper half of the average range for this time of year.
Separately, Saudi Arabia, Egypt, the UAE, and Bahrain cut diplomatic relations with Qatar in a coordinated move on June 5, repeating long-held claims that Qatar supports militant groups. Qatar denies those accusations (OGJ Online, June 7, 2017).
“The Qatar spat has so far been viewed as price negative as it carries a risk of lower compliance or even a collapse of the current deal to cut production until next March,” Hansen said.
OPEC and some major non-OPEC producers have extended production-cut targets through first-quarter 2018 to reduce world oil supply and support prices. The production-cut targets of 1.8 million b/d started in January and are based on October 2016 production levels.
Hans van Cleef of ABN AMRO agreed with Hansen that the Saudi-led dispute with Qatar has had very limited impact on oil and natural gas prices.
“The impact of the conflict resulted in a short-lived spike in oil prices before prices eased again,” van Cleef said. “The pressure on oil prices was triggered by increased worries about OPEC’s compliance regarding its production-cut agreement. If Qatar would not stick to its fair share of production cuts, other OPEC members may not feel obliged to do so, resulting in a ‘failure’ of the production balancing act.”
But van Cleef said he considered this “very unlikely,” adding, “Qatar is not a major oil producer.” He also said other producers, probably Saudi Arabia, could make up the difference even if Qatar were to decide to ignore its production-cut target.
The July light, sweet crude contract on the New York Mercantile Exchange dropped 8¢ to $45.64/bbl on June 8. The August contract fell 9¢ to close at $45.89/bbl.
The natural gas price for July edged up less than a penny to a rounded $3.03/MMbtu. The Henry Hub cash gas price was $2.94/MMbtu, down 5¢.
Heating oil for July edged up less than 1¢ to remain at a rounded $1.42/gal. Reformulated gasoline stock for oxygenate blending for July also gained less than a penny to remain at $1.49/gal.
The Brent crude contract for August on London’s ICE fell 20¢ to $47.86/bbl on June 8.
The September contract decreased 17¢ to $48.26/bbl.
The June gas oil contract was $421.50/tonne on June 8, unchanged from the previous day.
OPEC’s basket of crudes on June 8 was $45.78/bbl, down $1.
Contact Paula Dittrick at email@example.com.