Crude prices were up Thursday and Friday of last week but still closed with a seventh consecutive weekly loss for WTI — the longest losing streak since 2015. Fears that the multiple escalating trade wars will lead to a drop in global demand are trumping the warnings that the lack of sufficient investment and the beginning of problems with US shale oil output could lead to production shortfalls in the months ahead.
“A ballot measure requiring greater setbacks could have a dramatic effect on drilling in Colorado. In Weld County, Colorado, where much of the drilling in Colorado’s DJ Basin takes place, the greater setback distances would put roughly 78 percent of the surface land off limits to drilling. ‘That is effectively a ban on the industry,” Dan Haley, president of the Colorado Oil & Gas Association, told Bloomberg in a July interview. “You’d basically have no new wells drilled in Colorado.’”
Nick Cunningham, Oilprice.com
Oil prices slid about 3 percent last Wednesday as the trade dispute between the US and China escalated and after Chinese import data showed a slowdown in energy demand. However, prices recovered a bit on Friday as US sanctions against Iran looked as if they would tighten oil supplies ending up the week with New York futures at $67.63 and London at $72.81.
“Weekly data had shown a strong 324,000 b/d output rise [in US oil production] from March to May. The revised data shows that this rise was a mirage: output actually fell 19,000 b/d over the period. It is time to deal with the statistical gorilla on the oil trading floor. We think US crude oil production has not reached the 11 million b/d shown in recent weeks in the Energy Information Administration weekly data, and that it is significantly below 11mb/d, with growth slowing.”
Paul Horsnell, head of commodities research at Standard Chartered
Oil prices fell last week mostly on concerns that the looming US-China trade war would stifle demand. There was a short-lived rally on Thursday after the stocks report showed a 3.8 million barrel increase in total crude stocks mostly due to lower exports, but a 1.1 million drop in the inventory at Cushing, Okla. For now, the markets seem well supplied with production by Russia, the Saudis and the Gulf Arabs increasing after the relaxation of the market cap, and there has not yet been a significant reduction in Iranian exports in response to the new US sanctions. The week ended with New York oil futures down to $68.49 and London down to $73.21.
“The economic collapse I predict will occur because the world’s petroleum industry lacks the capacity needed to supply additional low-sulfur fuel to the shipping industry [in 2020] while meeting the requirements of existing customers such as farmers, truckers, railroads, and heavy equipment operators.”
Phillip Verleger, oil industry economist, and analyst
Oil prices climbed steadily through Thursday last week, supported by easing US-EU trade tensions and a temporary shutdown by the Saudis of a critical crude oil shipping lane. On Friday prices fell in sympathy with the US equities market to end the week at $74.29 in London and $68.69 in New York. Crude prices were unfazed last week by the unexpectedly robust US GDP figure, or the threatening rhetoric exchanged between Tehran and Washington.
“Climate change is a fact of life, as is not contested by Defendants. But the serious problems caused thereby are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.”
US District Judge John Keenan in Manhattan, in dismissing a lawsuit by New York City against major oil companies
The $3 drop in US oil prices last Monday was a signal that the forces moving the oil market are changing. Last year, the main forces pushing the oil markets higher were the agreement by OPEC and its partners to lower production and the growth of global demand. This year, an array of factors are pressuring the oil markets: the US sanctions that threaten to cut Iranian oil exports; US-China trade tensions; OPEC’s decision to raise crude output; and dwindling oil production from Venezuela. Moreover, there are supply disruptions in Libya, the Canadian tar sands, Norway, and Nigeria that add to the uncertainties as does erratic policymaking in Washington, complete with threats to sell off part of the US strategic reserve and a weaker dollar.
“Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales.”
Brian Hook, US State Dept, director of policy planning
