Oil Continues To Decline On Lower Demand And Higher Production

Crude seems unable to recover after this week’s price plunge. WTI oil is trading at 56.72 down by 21 cents while Brent oil added 18 cents after it fell below the $62 price level on Thursday. Brent oil is steady at $62 this morning. Benchmark crude oil prices have barely moved for more than two months, implying the market has found a temporary equilibrium after the enormous price shock in the second half of 2014 and early 2015. Over the last 30 trading days, the range between the highest and lowest closing prices for front-month Brent futures has been just $4.50 per barrel. That means that U.S. crude has fallen from a price range of $57-62 per barrel that it had been in since early May.

Brent crude prices were more stable, down just 3 cents at $62.04 per barrel. But the contract remained in a downward trend that has been in place since early May and which has seen prices fall almost 10 percent.

The trading range is the smallest since the shock began in June 2014, and down from a peak of almost $40 per barrel in early January 2015. In dollars per barrel, the range has been narrow by the standard of the last decade. Even in percentage terms, which allow for differences in outright prices, the market has been quiet. The trading range has been around 7 percent over the last 30 days, down from almost 40 percent at the start of 2015.

WTI oil prices dropped this morning as a rising U.S. rig count stoked fears of oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation.  The Iran nuclear talks were extended until July 7, giving oversupplied markets a breather despite uncertainty over the Greek financial crisis, analysts said.

“With the deadline now extended into next week on finding a comprehensive agreement on Tehran´s nuclear program, the markets will monitor closely the outcome of the negotiations as Iran sits on the fourth-largest oil reserves and second-largest gas reserves in the world,” said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at Ernst and Young.

Traders said that Asia’s commodity markets were also impacted by reports that China’s regulators had opened an investigation into suspected market manipulation after a slump of more than 20 percent in Chinese stocks since mid-June.

Yesterday Shanghai’s benchmark fell below 4,000 points for the first time since April – a key support level that analysts had expected Beijing to defend. They had predicted that more conservative investors would start closing out leveraged positions if the index dropped below 4,000.

In other energy products, Natural Gas is trading at 2.842 adding 15 points in the morning session gaining momentum regardless of the strength of the US dollar.  Natural gas posted a solid price gain Thursday, following a modest build last week and expectations of warmer temperatures through next week driving up demand for electricity to run all those air conditioners. Temperatures in the 90s to 100s will settle over much of the west, except right along the Pacific coast. The southeastern United States can expect some slightly cooler weather, while Texas and the southern Plains states can look forward to some cooling ahead.  The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 69 billion cubic feet for the week ending June 26. Analysts polled by Platts expected a storage injection (increase) of between 68 billion and 72 billion cubic feet. The five-year average for the week is an increase of around 75 billion cubic feet.