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Oil Advances Above $60 as Islamic State Captures Key Iraqi City
5/18/2015
Oil climbed above $60 a barrel after Islamic State took control of Ramadi, the capital of Iraq’s largest province. Futures advanced as much as 2 percent in New York, extending a record run of weekly gains. The Iraqi government mobilized Shiite Muslim militias after IS fighters took Ramadi, about 110 kilometers (68 miles) west of Baghdad. An Iranian aid ship is approaching Yemen, raising the risk of a showdown with the Saudi-led military coalition blockading Yemeni ports as it battles the country’s Houthi rebels.
Oil prices have rallied more than 40 percent from a six-year low reached in March as demand strengthened and a record decline in U.S. rigs fanned speculation that the nation’s production will slow from the highest pace in three decades. Turmoil in the Middle East could threaten growing supplies from Gulf-based members of the Organization of Petroleum Exporting Countries.
“The Gulf region continues to be a concern to the market, as Islamic State’s progress could ultimately threaten Iraqi production and Saudi Arabia’s relationship with Iran deteriorates,” Thina Saltvedt, an Oslo-based oil analyst at Nordea Bank AB, said by phone.
West Texas Intermediate for June delivery, which expires Tuesday, increased as much as $1.19 to $60.88 a barrel in electronic trading on the New York Mercantile Exchange, and was at $60.28 at 9:28 a.m. London time. The contract gained 0.5 percent last week, a ninth weekly advance and the longest rising streak since futures started trading in 1983. The more-active July futures were 60 cents higher at $61.14 a barrel.
Rig Count
Brent for July settlement gained 45 cents to $67.26 a barrel on the London-based ICE Futures Europe exchange. Prices gained 2.2 percent last week. The volume of all futures traded was about 37 percent below the 100-day average for the time of day. The European benchmark crude traded at a premium of $6.15 to WTI for the same month.
Islamic State’s latest advance in Iraq is a setback to the U.S.-backed Iraqi government of Prime Minister Haidar al-Abadi, undermining his claims that the group is on the retreat. Ramadi’s fall almost a year after Islamic State captured Mosul underscores the challenge facing the Obama administration to defeat the group, which has proven resilient to air strikes in Iraq and Syria.
Yemen Blockade
An Iranian ship carrying food and medicine entered the Gulf of Aden on Sunday, according to Iranian media. Iran’s navy has vowed to protect the vessel, and the government said it won’t allow any country involved in the fighting to inspect the cargo. The vessel will arrive at Yemen’s Red Sea port of Hodeidah on May 21, according to a state TV reporter on board.
The voyage is a direct challenge to the Saudi-led blockade and comes as the two nations vie for regional dominance. A confrontation near the Suez Canal and key oil transit routes would further destabilize a region rocked by conflicts from Iraq to Syria and Libya.
The number of active U.S. rigs drilling for crude slipped by eight to 660 through May 15, the smallest reduction in 23 weeks of declines, data from Baker Hughes Inc. show. U.S. shale production will drop in the second half of 2015, according to Ryan Lance, chief executive officer of ConocoPhillips.
The U.S. drill rig count has dropped 58 percent since Dec. 5, according to Baker Hughes. The number of active machines at the nation’s biggest oil field, the Permian Basin of Texas and New Mexico, fell by three to 233.
Upward Momentum
The U.S. pumped 9.37 million barrels a day in the week ended May 8, the Energy Information Administration said May 13. Output averaged 9.42 million a day in the week to March 20, the fastest pace since at least January 1983.
“Oil prices appear to have outpaced the improvement in underlying fundamentals,” Barclays Plc analysts including Warren Russell said Monday in a research note. The market “has failed to sustain upward momentum on recent relatively bullish EIA weekly statistics, sending the message that the market lacks conviction.”
The U.S. is producing more light sweet crude than it can refine, Conoco’s Lance said at a conference in Kuala Lumpur Monday. The company can be a stable supplier of American oil to world markets, he said, adding to industry pressure on the government to end a four decade-old ban on most crude exports.
BHP Billiton Ltd. is also pushing for a repeal of the ban, Tim Cutt, the president of BHP Billiton Ltd.’s petroleum division, said in a speech in Melbourne on Monday. Global oil supply is exceeding demand by as much as 2 million barrels a day, he said.
Speculators trimmed their bullish bets amid speculation supply will rise from the Organization of Petroleum Exporting Countries. Long wagers fell the most in two months and short bets dropped to the lowest since August, according to U.S. Commodity Futures Trading Commission data.
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5/18/2015
Oil climbed above $60 a barrel after Islamic State took control of Ramadi, the capital of Iraq’s largest province. Futures advanced as much as 2 percent in New York, extending a record run of weekly gains. The Iraqi government mobilized Shiite Muslim militias after IS fighters took Ramadi, about 110 kilometers (68 miles) west of Baghdad. An Iranian aid ship is approaching Yemen, raising the risk of a showdown with the Saudi-led military coalition blockading Yemeni ports as it battles the country’s Houthi rebels.
Oil prices have rallied more than 40 percent from a six-year low reached in March as demand strengthened and a record decline in U.S. rigs fanned speculation that the nation’s production will slow from the highest pace in three decades. Turmoil in the Middle East could threaten growing supplies from Gulf-based members of the Organization of Petroleum Exporting Countries.
“The Gulf region continues to be a concern to the market, as Islamic State’s progress could ultimately threaten Iraqi production and Saudi Arabia’s relationship with Iran deteriorates,” Thina Saltvedt, an Oslo-based oil analyst at Nordea Bank AB, said by phone.
West Texas Intermediate for June delivery, which expires Tuesday, increased as much as $1.19 to $60.88 a barrel in electronic trading on the New York Mercantile Exchange, and was at $60.28 at 9:28 a.m. London time. The contract gained 0.5 percent last week, a ninth weekly advance and the longest rising streak since futures started trading in 1983. The more-active July futures were 60 cents higher at $61.14 a barrel.
Rig Count
Brent for July settlement gained 45 cents to $67.26 a barrel on the London-based ICE Futures Europe exchange. Prices gained 2.2 percent last week. The volume of all futures traded was about 37 percent below the 100-day average for the time of day. The European benchmark crude traded at a premium of $6.15 to WTI for the same month.
Islamic State’s latest advance in Iraq is a setback to the U.S.-backed Iraqi government of Prime Minister Haidar al-Abadi, undermining his claims that the group is on the retreat. Ramadi’s fall almost a year after Islamic State captured Mosul underscores the challenge facing the Obama administration to defeat the group, which has proven resilient to air strikes in Iraq and Syria.
Yemen Blockade
An Iranian ship carrying food and medicine entered the Gulf of Aden on Sunday, according to Iranian media. Iran’s navy has vowed to protect the vessel, and the government said it won’t allow any country involved in the fighting to inspect the cargo. The vessel will arrive at Yemen’s Red Sea port of Hodeidah on May 21, according to a state TV reporter on board.
The voyage is a direct challenge to the Saudi-led blockade and comes as the two nations vie for regional dominance. A confrontation near the Suez Canal and key oil transit routes would further destabilize a region rocked by conflicts from Iraq to Syria and Libya.
The number of active U.S. rigs drilling for crude slipped by eight to 660 through May 15, the smallest reduction in 23 weeks of declines, data from Baker Hughes Inc. show. U.S. shale production will drop in the second half of 2015, according to Ryan Lance, chief executive officer of ConocoPhillips.
The U.S. drill rig count has dropped 58 percent since Dec. 5, according to Baker Hughes. The number of active machines at the nation’s biggest oil field, the Permian Basin of Texas and New Mexico, fell by three to 233.
Upward Momentum
The U.S. pumped 9.37 million barrels a day in the week ended May 8, the Energy Information Administration said May 13. Output averaged 9.42 million a day in the week to March 20, the fastest pace since at least January 1983.
“Oil prices appear to have outpaced the improvement in underlying fundamentals,” Barclays Plc analysts including Warren Russell said Monday in a research note. The market “has failed to sustain upward momentum on recent relatively bullish EIA weekly statistics, sending the message that the market lacks conviction.”
The U.S. is producing more light sweet crude than it can refine, Conoco’s Lance said at a conference in Kuala Lumpur Monday. The company can be a stable supplier of American oil to world markets, he said, adding to industry pressure on the government to end a four decade-old ban on most crude exports.
BHP Billiton Ltd. is also pushing for a repeal of the ban, Tim Cutt, the president of BHP Billiton Ltd.’s petroleum division, said in a speech in Melbourne on Monday. Global oil supply is exceeding demand by as much as 2 million barrels a day, he said.
Speculators trimmed their bullish bets amid speculation supply will rise from the Organization of Petroleum Exporting Countries. Long wagers fell the most in two months and short bets dropped to the lowest since August, according to U.S. Commodity Futures Trading Commission data.
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