Oil prices rise as supply worries take the spotlight By Neanda Salvaterra Published: July 3, 2018 7:13a.m. ET
Reuters Pipelines in the Zueitina oil terminal in Zueitina, west of Benghazi, Libya September 14, 2016.
Oil prices climbed Tuesday amid uncertainty over the duration of supply outages in Libya and falling inventories in North America, even as Saudi Arabia and Russia pumped more crude into the market.
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
Brent crude , the global oil benchmark, rose 0.9% to $77.95 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 1% at $74.85 a barrel. Major oil ports in Libya have been shut due to an armed struggle that has removed 850,000 barrels a day from the global oil market and boosted prices. The U.S. crude grade has gained particular support from declining domestic crude stocks and supply disruptions in neighboring Canada. "Brent is not really flying despite the outages in Libya," said Olivier Jakob, an oil analyst at the consultancy Petromatrix. "It's difficult to know how long that will last because it's more due to political issues, [while] WTI is pretty much pricing in the very low stocks in Cushing," he added, referring to oil-storage facilities in Oklahoma. Price rises were limited by Saudi Arabia, which has been steadily increasing its production by 600,000 barrels a day in the past three months to reach 7.5 million barrels a day in June--the highest level since early 2017, according to analysts. The Saudi move has mainly come in response to rising oil prices, which are hitting consumers. President Donald Trump also called on the Middle Eastern country to ramp up output. Investors are concerned about any additional crude that might disrupt a newly attained equilibrium in the supply and demand for oil. The crude market has balanced out due to an effort by the Organization of the Petroleum Exporting Countries and a handful of external producers such as Russia since last year to remove almost 2% of the supply and mop up an oil glut that was weighing on oil prices.
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
Analysts differ on how much spare capacity Saudi Arabia can bring to the market to offset the tightening of the market, but some say the kingdom could increase exports by destocking while it prepares to increase its production capacity. "We now expect Saudi supply to rise in July to around 10.8 million barrels per day, which would represent a new record figure for Saudi Arabia," said analysts for JBC Energy in a recent report. Meanwhile, Russia has also ramped up its output by about 100,000 barrels a day. "Right now the market is caught between two forces," said Michael Cohen, the head of energy commodities research at Barclays. "Supply side disruptions that are bullish for oil, and demand side forces including the threat of trade protectionism that threaten the global economy and would thus be bearish for oil prices and most other commodities." Looking ahead, analysts are expecting a lower volume of trading in the second half of the week due to a major U.S. holiday on Wednesday and inventory data on Thursday from the Energy Information Administration possibly showing additional stock draws. Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- rose 0.42% to $2.11 a gallon. ICE gasoil changed hands at $663.00 a metric ton, down $0.50 from the previous settlement. August heating oil rose 0.7% to $2.176 a gallon. August natural gas was flat at $2.858 per million British thermal units.
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.