Updated .. Oil losses exceed 1.5% at the settlement in a volatile session
24 July 2019 09:56 PM
Mubasher : Oil prices fell on Wednesday's trading session, in a volatile session despite a sharp decline in inventories and US production.
The US Energy Information Administration revealed that oil inventories in the United States fell by 10.8 million barrels more than expected last week.
US oil production fell by 700,000 barrels last week to 11.300 million barrels.
Investors are watching the resumption of trade talks next week in the hope of a deal between China and the United States that undermines fears of slowing demand.
However, fears of a slowdown in economic growth and then slowing demand for investors' trading were after negative data on industrial activity in the world.
Iranian President Hassan Rowhani also said that his country is ready for fair negotiations, if it does not mean surrender, according to Reuters, "in reference to the possibility of calm geopolitical fears.
On the settlement, US Nymex crude futures for September delivery fell 1.6 percent to $ 55.88 a barrel, after rising $ 57.64 a barrel.
By 6:50 pm GMT, the benchmark Brent crude for September delivery fell 0.8 percent to $ 63.24 a barrel from $ 64.66 a barrel earlier in the session.
OPEC deal important for oil market stability: Iraqi PM
By Mohammed Rwanduzy 2 hours ago
Iraqi Prime Minister Adil Abdul-Mahdi addresses reporters during his weekly press conference in Baghdad on July 2, 2019. Photo: Iraqi PMO video
ERBIL, Kurdistan Region — Iraq’s premier praised the OPEC deal to on Tuesday staying oil production cuts for nine more months because it is important for market stability as Baghdad is so heavily dependent on oil revenue.
“This is important for market stability. This topic, for us, the Kingdom and all the producers and exporters of oil is important because budgets depend on oil market stability,” Iraqi PM Adil Abdul-Mahdi told reporters in his weekly press conference on Tuesday.
Members some non-members of the Organization of Oil Producing Countries (OPEC) met in Vienna this week. Following a prior agreement on Monday between Saudi Arabia and Russia, the cartel agreed to extend production cuts of 1.2 million barrels per day (bpd) for nine more months until March 2020 in a bid to push global prices higher.
The agreement was based on the Saudi desires to “face market developments and preserve the measures undertaken”, the PM Abdul-Mahdi revealed, adding that he had a phone call with Saudi King Salman prior to the deal.
According to Iraqi Ministry of Oil statistics for the month of June, Iraq’s oil revenue fell from $7.38 billion in May to $6.4 billion in June as its exports fell by 6 percent, from 111 million barrels in May to 105 million barrels in June.
Iraq exports around 3.5 million barrels per month — the second highest crude oil producer in OPEC.
Iraq has agreements, especially a mega deal with the US giant ExxonMobil, to develop its southern oilfields to increase its production capacity. However, due to a missile that hit the main headquarters of the company in Basra, some foreign staff were evacuated in June.
The attack against ExxonMobil came amid soaring US-Iran tensions; Iraq could be negatively impacted if the hostilities breakout between Iran and the US.
However, it also raised questions about Iraq’s ability to provide a secure atmosphere in which foreign companies could invest in the decades-deprived oil sector. It has been reported that Iraq could act as Iran’s “ATM” to provide a loophole for US sanctions.
Abdul-Mahdi, in his typical understated manner downplayed the incidents against energy and other companies working in Iraq, claiming they do not exceed those in “other countries.”
“The security measures are crystal clear. Yes there have been threats, but no real security violation has taken place to any of our oil and non-oil installations. We undertake all measures,” he said.
Some ExxonMobil employees have returned, the PM claimed, without elaborating.
Separately, the PM also touched on connecting Iraq’s electricity grid to Arab and regional electricity grids — namely Jordan, Syria, Saudi Arabia, Turkey and Egypt.
“We haven’t concluded this matter. It is still in the discussion stage. There is both a technical and a financial aspect to it. This is not something that [doesn’t entail] certain financial burdens, extending networks, and costs for these units,” the PM said, though adding the discussions are “serious.”
“We, as Iraq, have to be connected to [electricity] grids just like the countries of the world,” he emphasized.
Iraq does import electricity from Iran, but there needs to be greater interconnection with other regional countries, the PM posited.
Iraq’s electricity grid is aging and strained by an increasing population, reconstruction and development. Usage also peaks in the summer months as temperatures in the south soar over 50 Celsius. The hours of government-produced electricity varies greatly across Iraq and the Kurdistan Region by geography.
Saudi Arabia's minister of energy Khalid A Al-Falih in Vienna, on June 2, 2016.
Oil futures moved sharply higher on Friday, as investors showed some optimism about what will come out of next week’s meeting of the Organization of the Petroleum Exporting Countries.
Up for final discussion by the cartel is whether to extend the current six-month production-cut deal beyond the mid-2017 expiration, and if so, for how long and whether the reductions should be increased.
It is widely expected an extension will occur, and energy officials from Saudi Arabia and Russia this week signaled they back a nine-month extension. That helped give oil a start-of-week gain that’s been built on since, putting crude on pace to modestly top the 3.5% jump logged last week.
After settling Thursday at three-week highs, light, sweet crude futures for delivery in June CLM7, +1.64% jumped 59 cents, or 1.2%, to $49.93 a barrel. The contract briefly topped $50 a barrel for the first time since April, according to FactSet data.
July Brent crude LCON7, +1.77% on London’s ICE Futures exchange also gained 59 cents, or 1.2%, to $53.10 a barrel.
Li Li, energy research director at ICIS China, attributed Friday’s advance to pre-meeting optimism, but said she doesn’t “expect prices to jump hugely from the current trading range.”
The presidential election in Iran was also grabbing oil trader’s attention on Friday. Commerzbank analysts said the result could have “major consequences for the oil market” if conservative cleric Ebrahim Raisi wins the vote. Raisi and reform-oriented incumbent Hassan Rouhani are leading the polls.
Read: Iranians head to the polls in high-stakes presidential election
Raisi has expressed criticism of the nuclear agreed in 2015 that paved the way for the U.S.-led sanctions to be lifted and allow Iran to sell oil on the international energy markets.
If Raisi wins “the agreement in its current form would risk being overturned. New sanctions would then very likely be imposed by the US and the West, which could reduce the oil supply from Iran even in the short term,” the Commerzbank analysts said.
“An election victory for Raisi would therefore drive oil prices up noticeably,” they added.
Read: The overlooked upside for oil in Iran’s election
Later on Friday, oil prices would also be steered by the latest weekly U.S. rig-count data from Baker Hughes. That report has shown 17-straight weeks of growth in active oil-drilling rigs.
But government figures on Wednesday showed the first week-to-week drop in domestic oil production since February, a development which also helped lift crude prices this week and get light, sweet crude back toward $50.
To some, the past two weeks’ price rebound was to be expected after April’s slide. That drop “was a case of sentiment over substance,” said BMI Research. It sees more price gains to come the next several months, but they “are more likely to be incremental rather than exponential.”
As for oil products, Nymex June gasoline futures RBM7, +1.72% rose 1% to $1.62 a gallon, while ICE gasoil gained 1% to $469.75 per metric ton.
Natural gas futures NGM17, +2.36% advanced 0.8% to $3.21 per million British thermal units.