INZ: Oil price: Brent moves towards $107 on supply glut
Crude Oil Price
iNVEZZ.com, Wednesday, July 23: Although some significant oil suppliers are witnessing conflicts that could potentially affect their crude output, excessive supplies are helping rein in price gains. On the ICE Europe Futures exchange, front-month Brent futures were down nine cents a barrel to $107.24 as of 09:11 BST, after retreating 47 cents yesterday to $107.33.
"The fundamentals in Brent are very weak with a glut in places like Nigeria and Angola. But upcoming maintenance in the North Sea will help relieve that glut, which I think will support Brent in the next month or two," Yusuke Seta, a commodity sales manager at Tokyo's Newedge Japan, told Reuters. "And with strong supporting news in places like Iraq and Russia, I believe the bearish market sentiment is temporary," Seta added.
Yesterday, the EU threatened Russia, the world’s largest producer of crude oil, with harsher sanctions after the downing of the Malaysian airliner but postponed action for a few days. However, France said it will move forward with a sale of a warship to Russia, despite calls for an embargo. The incident highlights the difficulty Europe faces in implementing punitive measures against Russia over its role in the Ukraine crisis because of close business ties.
According to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), as of July 21, Israel’s operation Protective Edge had resulted in at least 364 civilian deaths among Palestinians, of whom 121 were children and 59 women, while two Israeli civilians were killed. A single airstrike on July 20 killed 25 members of a Palestinian family, 18 of whom were children. The number of displaced people in Gaza for the period reached 100,000. They have been hosted among 69 United Nations Relief and Works Agency (UNRWA) schools.
In an address at the White House yesterday, US President Barack Obama said he gave instructions to Secretary of State John Kerry to push for an immediate cease-fire. He said his country was “seriously concerned over the rising number of Palestinian civilian casualties, and over the loss of life on the Israeli side,” Haaretz reported. “We don’t want to see any more Palestinian civilians killed,” Obama said.
Meanwhile, a spokesman from Libya’s National Oil Company said the country’s production had declined to about 450,000 barrels per day (bpd) as of Monday, from 555,000 bpd on Thursday, according to Reuters. Armed clashes in Benghazi resulted in at least thirty deaths, while the death toll from fighting around Tripoli’s international airport had climbed to more than 53, al-Jazeera reported.
In the US, West Texas Intermediate dropped for a second day after data revealed US gasoline inventories grew last week. On the COMEX, WTI for September delivery was down 22 cents to $102.17 a barrel as of 10:25 BST. The September contract was trading at a premium, or backwardation, of $1.15 a barrel to October. WTI is up 3.7 percent in the year-to-date.
According to the American Petroleum Institute, an industry group, gasoline stockpiles in the US expanded by 3.6 million barrels last week.
“Tensions related to Ukraine seem to be fading a bit with clear signs that the separatists are willing to help, and with no new sanctions on Russia introduced,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, told Bloomberg by phone. “Attention will turn later to stockpile numbers, particularly those at Cushing, as that is what is causing WTI to be backwardated while Brent is in contango,” he argued.
The US Energy Information Administration (EIA) is to release its Weekly Petroleum Status Report at 15:30 BST today. A Reuters’ survey of analysts points to a 2.8 million-barrel contraction in US supplies in the week to July 18, compared with a 2.9 million decline forecast in a Bloomberg survey. The latter estimates US gasoline stockpiles to have fallen to 213.5 million barrels for the period – which would be their first weekly decrease this month.
“There’s some nervousness that the demand that was anticipated isn’t coming through, so we’ll see a cautious session leading into those numbers,” Michael McCarthy, chief strategist at CMC Markets in Sydney, told Bloomberg.
