Oman crude holds above $100 again
Oman crude oil trading last month on the Dubai Mercantile Exchange averaged above US$100 a barrel for the 22nd consecutive month, as political tension between Russia and Ukraine underpinned oil values.
In the Middle East both Iraq and Iran struggled to build on increased exports during the first quarter of the year.
The monthly average of the DME in April, which is used by Oman and Dubai to set their official selling price (OSP) was $104.98, compared with $104.36 in March. But the DME June Oman crude contract settled at a two-week low of $104.88 per barrel last Wednesday, when this month’s contract finished trading, down $0.16 a barrel from the closing March price of $105.04. Middle East crude oil typically trades two months forward.
Record-high oil stocks in the United States last month and prospects for increased exports from Libya, plus relatively weak sanctions on Russia were cited as factors for the sluggish finish to April – a sentiment that some analysts believe will carry through into May.
“Crude oil stocks in the US are rising to their highest level in decades and that’s weighing on the whole crude complex,” the SEB analyst Bjarne Schieldrop was quoted by Reuters as saying.
US crude inventories rose by 1.7 million barrels to 395 million barrels, the highest level since the nation’s government started collecting data in 1982.
Meanwhile, US sanctions targeting Russian individuals and companies believed to have close links to the Russian president Vladimir Putin were not expected to effect Russian oil and gas exports, muting the effect of the Ukraine crisis on energy prices – although the prospect of a deteriorating situation has been an ever-present factor in the oil markets during recent weeks.
Reports of Libya’s Zueitina oil terminal resuming operations in the near future also added a bearish note to the market as the country’s oil shipments would add to already abundant global supplies, noted analysts. The port has an export capacity of about 100,000 barrels per day. This is minuscule in global supply terms, but it could mark a turning point for Libya’s fortunes.
In the Arabian Gulf, exports from both Iraq and Iran failed to match levels reached earlier in the year. Iraq exports last month were about 2.5 million bpd, well short of a target of 3.4 million bpd this year. Iraqi exports hit a multi-decade high of 2.8 million bpd in February, but dipped to about 2.4 million bpd in March after insurgents blew up a northern pipeline running from the Kirkuk oilfields to a port in Turkey.
Iran’s exports in April fell for a second month, according to a Reuters report that tracks tanker movements, moving closer to levels allowed by November’s interim deal on Tehran’s nuclear programme. Iran’s crude exports were believed to have averaged 1.1 million bpd during the month, down from almost 1.3 million bpd in March.
Despite these losses, some Middle East grades were subject to some downwards pressure on spot market prices because of the peak refinery maintenance season among key Asian customers. Crude grades from Abu Dhabi – such as Upper Zakum and Murban – were trading at a discount to the OSP, but this is expected to be temporary as North Asian refiners increase crude runs for the summer. Japan typically reports a spurt in oil demand during the summer to fuel power generation as Japan’s nuclear sector remains largely idle.
Paul Young is the head of energy products at DME
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Published: May 6, 2014 04:00 AM