Oil futures steadied early today on an expected drop in United States inventory, but worries over the Greek debt crisis and China’s stock market turmoil dragged on prices.
Light Sweet Crude Oil futures for August delivery, the most actively traded contract, dropped USD0.68 or 1.3%, to settle at USD51.65 a barrel on the New York Mercantile Exchange Wednesday.
Oil prices have finished mixed as investors faced growing uncertainty over the Greek debt crisis and China’s efforts to stem a stocks rout in the world’s top energy consumer. A big part of the nuclear deal is that the West will lift sanctions on Iran, allowing it to increase its oil exports.
Meanwhile, analysts at Commerzbank said the protracted Iranian negotiations will delay any removal of sanctions by up to one month, meaning the Middle East nation’s plans to export more crude oil have, at the very least, been delayed.
Among the 12 members of the oil cartel, Nigeria has the fourth largest breakeven oil price after Libya ($184), Ecuador ($145) and Iran ($131). Brent settled at $60.32 per barrel, 2.8% lower than Thursday’s close, ahead of the Greece referendum. However, it is still above the revised benchmark oil price of US$45 per barrel and a revised T&T netback wellhead gas price of US$2.25 per mmbtu on which the national budget is pegged.
“It’s not only what’s happening here in the continental US, it’s what is happening throughout the world”, said Nancy White, a spokeswoman the AAA Motor Club, which tracks gasoline prices through its Fuel Gauge Report.
As stated by industry analysts, unless Nigeria develops a mechanism by which it would begin to utilise its crude production internally, the naira would continue to be put under pressure due to the falling oil price. The price did rebound a little on Tuesday – which could have been the market pulling back from some of it overexuberance, or reflecting reports that talks would be extended past Tuesday’s deadline.
It’s not a game changer to the 90 million-barrel-per-day oil market, as PIMCO points out.
The oil price remained at the bottom of their recent trading range, but showed a sharp move upward as traders bought up the cheap commodity.
Others say a persistent surplus in global oil supplies is a more important cause of the price slide, and see scope for further declines.
“The fall in oil prices (this week) is a story of fear and fundamentals”, historian Daniel Yergin wrote.
But can such a marginal increase in the number of rigs drilling for oil explain a fall of 6 percent in oil prices on a single day or 17 percent over the last month?