Oil Rallies As Iran Says No to France and Britain
After gaining approximately 2 percent over the week ending February 17th, crude oil kicked off a shortened week rallying an additional 3% on the NYMEX. While the broader markets breathed a collective sigh of relief on Greek bailout news, the big story for oil was Iran's decision to stop selling crude to Britain and France, ahead of the EU sanctions scheduled for July. Based on recent tallies, the stoppage represents approximately 60,000 barrels per day that Iran will now not sell to the two countries.
Light, sweet crude for March delivery on the NYMEX gained $2.60, or 3 percent, to $105.84 per barrel. Today was the final day of trading for the March WTI contract. Meanwhile, April futures for Brent crude gained $2.08 to close at $121.66 per barrel, its highest close since May 2011.
Among refined products, March reformulated gasoline blendstock was up nearly six cents to finish at $3.07 per gallon. Prices are gradually approaching the mark where driving patterns shift, i.e. when high retail gasoline prices sop up the average consumer's discretionary wallet. Rigzone previously calculated that $3.75 for regular unleaded gasoline is the point where demand destruction begins to occur. AAA recently pegged the average price for regular unleaded gas in the US as $3.56 per gallon.
Natural gas continued its fall ending the day at $2.63 per MMBtu, or down 6 cents, for the front-month contract. Smaller operators are contemplating cutting their natural gas drilling budgets in dry gas basins. Over time, drilling cutbacks and substitution towards more natural gas electric generation will go a long way towards rebalancing this market in the upcoming summer months.
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