Washington — ICE September Brent crude led the oil complex sharply lower Monday after Russian President Vladimir Putin said his country and the US will work together to regulate international oil markets.
Putin’s comments came shortly after a briefing with US President Donald Trump.
Brent settled $3.49 lower at $71.84/b, but not before falling as low as $71.52/b, the prompt contract’s lowest mark since mid-April. NYMEX August WTI fell sharply as well, sliding $2.95 to $68.06/b. Prompt WTI fell as low as $67.58/b, its lowest since the last week of June.
“I believe we as major oil and gas countries may work constructively to regulate international markets because we are interested neither in an extreme drop in prices — as our producers [including shale oil and gas producers in the US] will suffer — nor extremely high prices,” because they will negatively impact the countries’ economies, Putin said.
“There is a room for cooperation,” he said, without elaborating.
Trump has taken to Twitter several times to demand that OPEC increase oil production to ease prices, which have come off sharply so far in July despite steady US crude draws.
Analysts surveyed by S&P Global Platts Monday expect US Energy Information Administration oil data to show US crude stocks fell 3 million barrels last week.
Concerns persist about oil supply shortages in the fourth quarter when US sanctions against Iran come into force. Further, instability in Venezuela and Libya remain, as do strike threats in the North Sea and production issues in Alberta, Canada.
“The complex has wasted little time in offsetting Friday’s gains as the specter of increasing production out of Saudi Arabia, Russia and the US has come under increased focus now that Libyan ports appear to be reopening,” Ritterbusch & Associates analyst Jim Ritterbusch said.
“And with the equities having difficulty staying in the plus column while shrugging off some early dollar weakness, it appears that liquidation out of the energy space will be the order of the day to begin this new week,” Ritterbusch said.
Reports over the weekend suggested the Trump administration is considering releasing additional supplies to prevent price spikes, while Saudi Arabia was heard to be offering larger volumes to customers in Asia who have pulled back sharply on Iranian imports. Russian officials have also said they will bring 200,000 b/d of additional product back into the market as output cuts ease.
The US Department of Energy’s Office of Fossil Energy is weighing multiple sizes for the release, but it is unclear what may trigger a release, such as oil or gasoline prices hitting a specific level, sources said.
The SPR, which has a storage capacity of 713.5 million barrels, held 660 million barrels as of July 6, including 254.6 million barrels of sweet crude and 405.4 million barrels of sour crude, according to DOE.
S&P Global Platts Analytics said it does not expect an SPR release, considering the collective ability of Saudi Arabia and Russia to balance the market.
“But with Iran sanctions set to bite by [the fourth quarter of the year], Venezuelan declines continuing, and possible unexpected supply disruptions, such as Libya, tighter balances and high prices could change things,” Platts Analytics said.
NYMEX August RBOB fell 10.45 cents to $2.0022/gal and NYMEX August ULSD fell 7.91 cents to $2.0543/gal.
–James Bambino, with Nadia Rodova in Moscow and Brian Scheid in Washington
Source: S&P Global Platts
