London — Crude futures were nearly flat on Tuesday morning in European trading, as bearish sentiment and comments from Russian president Vladimir Putin that the US and Russia would cooperate on oil prices balanced out a flurry of supply disruptions.
At 1050 GMT, September ICE Brent was down 1 cent on the day to $71.83/b, while the August WTI futures contract was up 11 cents to $68.09/b, after strengthening throughout the morning.
“Given the uncertain and unpredictable political and economic backdrop it is as easy to make a bearish case for oil as a bullish one,” Tamas Varga of PVM said in a morning note.
This week, the market was weighing a cocktail of bearish factors, including comments on Monday from Putin that the US and Russia would work together to manage price swings on the crude market, during a meeting between the Russian leader and US President Donald Trump in Helsinki.
Those comments accompanied signs that Saudi Arabia is already aggressively increasing its output as part of the process of easing OPEC production cuts by 1 million b/d, alongside market comments and rumors that the US is considering tapping into its Strategic Petroleum Reserve, which as of July 6 was holding 660 million barrels, in an effort to limit price spikes on the gasoline market during the summer driving season.
However, those bearish signals also accompanied a wide range of supply threats, both short term and long term, analysts said on Tuesday.
“In the bearish corner there are [OPEC/non-OPEC], Libya, Nigeria and the SPR,” said Tamas Varga, referring to the end of the force majeure last week in Libya, while Shell also lifted its force majeure on Nigerian Bonny Light crude oil exports. “In the bullish corner we have Norway, Libya, Venezuela, and the US/Iran.”
In addition to rising output from OPEC and non-OPEC members of the production cut agreement, strikes in Norway’s oil fields have raised worry about the impact on supply. On Monday, strikes at offshore oil operations over wages expanded to 1,550 workers and 28 drilling installations, and production at the Shell-operated Knarr field shut down. However, Equinor — formerly Statoil — has said its production so far is unaffected, and other operators in the region said the impact has so far been limited.
Meanwhile, production at Libya’s Sharara field, the country’s largest, was shut down over the weekend following the kidnapping of some workers.
Longer-running supply risks also remain: Venezuela’s output has been in freefall amid political and economic crisis in the country, while sanctions on Iran are still expected to take a large bite out of total supply, despite comments from US officials recently that some countries may be eligible for case-by-case exemptions.
The mixed sentiment has created dramatic volatility on crude markets, analysts noted.
“Production disruptions and large supply shifts driven by US political decisions are the drivers of this new fundamental volatility, with demand remaining robust so far,” Goldman Sachs analysts said in a morning note.
Looking forward, the market will also be waiting for signals on Tuesday and Wednesday on US inventories, with the American Petroleum Institute numbers to be released today, followed by figures from the Energy Information Administration tomorrow.
Analysts surveyed Monday by S&P Global Platts were expecting US crude stocks to have declined by 3 million barrels for the week ended June 13, which would mark the sixth draw since the start of June, with a total decline of 31 million barrels so far.
–Katherine Dunn, [email protected]
–Edited by Maurice Geller, [email protected]
Source: S&P Global Platts
