MARKET WATCH: NYMEX, Brent oil prices drop on ample crude supply

The light, sweet crude oil contract for September delivery dropped on the New York market Aug. 5 to remain below $46/bbl while the Brent price settled below $50/bbl again on the London market upon lingering concerns about an oversupplied world oil market.

In Aug. 6 trading, the September ICE contract for Brent touched its lowest level for a front-month price since January.

Julius Baer Group, a global Swiss private bank, lowered its forecast for Brent prices to $55-60/bbl “in the near term, but even lower long term,” the Wall Street Journal reported.

Meanwhile, US President Barack Obama supported a proposed Iran accord during an Aug. 5 speech that Obama gave at American University. Lawmakers will review that agreement, reached July 14 between Iran and international negotiators concerning Iran’s nuclear program.

The US Congress currently is in its August recess. Authorization of the agreement would mean the lifting of sanctions, and the eventual return of more Iran oil to world markets.

Oliver Jacob of Petromatrix said he believes an oil price recovery will hinge upon the Organization of Petroleum Exporting Countries.

“As Iran comes back to the market, under the current Saudi oil policy, it is still more likely in our opinion that any sustained price recovery will come through another OPEC country breaking down than from North American crude oil production collapsing,” Jacob said.

Norbert Ruecker, head of Julius Baer commodities research, told the WSJ that oversupply concerns are a burden on oil prices. “Shale oil producers are lowering costs swifter-than-expected, proving their superior competitiveness within the industry,” Ruecker told the WSJ, adding that US unconventional producers have surprised many with their “resilient production.”

Regarding natural gas in storage across the Lower 48, the US Energy Information Administration estimated levels at 2.91 tcf as of July 31, which was a net increase of 32 bcf from the previous week. Stocks were 535 bcf higher than last year at this time and 64 bcf above the 5-year average of a rounded 2.85 tcf, the Gas Storage Report said.

Energy prices

The September crude oil contract on the New York Mercantile Exchange dropped 59¢ on Aug. 5 to settle at $45.15/bbl. The October contract was down 58¢ to $45.55/bbl.

The natural gas contract for September was down 1¢ to a rounded $2.80/MMbtu. The Henry Hub, La., gas price climbed 4¢ to $2.86/MMbtu.

Heating oil for September delivery declined nearly 1¢ to a rounded $1.54/gal. The price for reformulated gasoline stock for oxygenates blending for September dropped by 1¢ to a rounded $1.67/gal.

The September ICE contract for Brent crude declined 40¢ to $49.59/bbl on Aug. 5. The October contract was down 48¢ to $50.15/bbl. The ICE gas oil contract for August was unchanged at $473.25/tonne and the September contract also was unchanged at $476/tonne.

The average price for OPEC’s basket of 12 benchmark crudes for Aug. 5 was $47.89/bbl, down 1¢.

Contact Paula Dittrick at [email protected].

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.