Brent crude oil for September topples more than US$5/bbl

The price of Brent crude oil for September fell more than $5/bbl on the London market on the 11^th July while the light, sweet crude oil price for August delivery fell by more than US$3.70/bbl on the New York market upon news reports of resuming Libyan exports and the US-China trade dispute.

“The market’s move lower…seemed quite extreme,” Warren Patterson, an ING commodities strategist, told the Wall Street Journal. “It ignored the biggest US crude drawdown since September 2016.”

The US Energy Information Administration reported crude oil inventories, excluding the Strategic Petroleum Reserve, decreased 12.6 million bbl for the week ended the 6^th July to an estimated 405.2 million bbl.

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The Weekly Petroleum Status Report said US production held unchanged at 10.9 million b/d.

Separately, Barclays analysts on the 10^th July said they revised their Brent forecast for the second half to US$73/bbl, up about US$3/bbl from the firm’s previous forecast.

Brent front-month crude prices ranged US$77-80/bbl during July until the steep decline on the 11^th July, which was its biggest single-day decline in more than two years.

Barclays forecast 2019 Brent crude will average US$71/bbl. Barclays revised its Brent forecast based on lower oil supply from Libya. The revised forecast also cited anticipated lower oil exports and production from Iran, which faces unilateral US sanctions starting on the 4^th November.

Libya announced plans to reopen four ports that had been closed because of threats from armed rebels starting in June. This means the resumption of oil exports although it is yet unclear when that oil will reach world markets.

The market underestimates spare capacity available from Saudi Arabia, Russia, Kuwait and UAE, Barclays said.

Oil traders and investors “ought to beware of Saudi Arabia and Russia’s clear willingness to cap the upside in prices,” said analyst Michael Cohen of Barclays’ New York office. “As prices rise to higher levels, the air is growing thin and oil demand is already faltering.”

Other forecasts indicate oil prices will remain higher than Barclays suggests. Morgan Stanley recently raised its six-month outlook for Brent to US$85/bbl. Goldman Sachs previously forecast Brent crude will peak at US$82.50/bbl by late August.

Energy prices

The August light, sweet crude contract fell US$3.73 to settle at US$70.38/bbl on the 11^th July. The September price dropped US$3.70 to US$68.86/bbl.

The NYMEX natural gas price for August rose 4¢ to a rounded US$2.83/MMbtu. The Henry Hub cash gas price held unchanged at US$2.84/MMbtu.

Ultralow-sulphur diesel for August decreased 1¢ to a rounded at US$2/gal. The NYMEX reformulated gasoline blendstock for August fell 10¢ to a rounded US$2.06/gal.

Brent crude oil for September decreased US$5.46 to US$73.40/bbl on London’s International Commodity Exchange. The October contract dropped US$5.29 to US$73.33/bbl. The gas oil contract for July was US$674.75/tonne, down US$4.

The OPEC basket of crudes average price for the 11^th July was US$74.40, down US$1.94.

Source: Oil & Gas Journal