Oil Drops as Flows Unhindered Following Coup Attempt in Turkey
(Bloomberg) - Oil declined following a failed coup in Turkey as shipments continued through the vital conduit from Russia and Iraq to the Mediterranean Sea.
Futures slid 1.6 percent in New York. Oil tankers are loading and unloading at Turkey’s ports, and supplies are arriving in pipelines from neighboring countries, an Energy Ministry official said Sunday, asking not to be identified in line with ministry rules. President Recep Tayyip Erdogan ordered reprisals for the attempt to oust him. The oil price recovery will remain volatile amid mounting risks, BMI Research wrote in a note.
The situation in Turkey “is far from settled. If we were in a tight market where inventory had been run down, this would matter a lot, but we have inventory acting as a buffer,” Amrita Sen, chief oil economist for Energy Aspects Ltd. in London, said by telephone.
West Texas Intermediate crude for August delivery fell 71 cents to settle at $45.24 a barrel on the New York Mercantile Exchange, reversing gains in the two previous sessions.
Brent for September settlement declined 65 cents, or 1.4 percent, to end the session at $46.96 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $1.02 to WTI for September.
The Turkish Straits, including the Bosphorus and Dardanelles, are among the world’s major choke points for seaborne crude, with about 2.9 million barrels of oil passing through daily in 2013, the latest year of available data from the U.S. Energy Information Administration. No cargoes have been halted since large tankers were barred from sailing in the Bosphorus waterway near Istanbul for several hours on Saturday, a port agent said.
The country is also home to pipelines that transport crude and condensate from nations including Iraq and Azerbaijan to the port of Ceyhan on the Mediterranean Sea in southern Turkey. BP Plc, operator of the Baku-Tbilisi-Ceyhan pipeline from Azerbaijan via Georgia, confirmed that oil was flowing uninterrupted.
Oil has traded between $44 and $51 a barrel since early May after a string of supply disruptions pushed prices up by more than 70 percent from a 12-year low in February. Meanwhile, some analysts paint a bearish picture and see oil heading back to $40 a barrel. The price recovery will remain volatile even as U.S. production declines due to downside risks amid an oversupplied market, BMI Research said.
The seasonal increase in gasoline demand is not proving strong enough to clear the glut in fuel supplies, the report said. Gasoline stockpiles climbed by 1.21 million barrels in the week ended July 8, according to an Energy Information Administration report.
“Within the oil market, the physical markets don’t look particularly strong,” Eric Lee, an oil market strategist at Citigroup Inc., said by telephone. “Refinery margins are weakening.”
Shrinking margins are leading refiners to reduce crude-processing rates. Alon USA Energy Inc. plans to cut run rates at its Krotz Springs, Louisiana, plant in August, according to a person familiar with the matter who asked not to be named because the plan isn’t public. The gasoline crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, has fallen by about a third since late May to near $13 a barrel.
“Refining margins all over the world are starting to suffer. Run cuts generate a very direct mechanism to hurting crude prices,” Vikas Dwivedi, an oil and gas strategist at Macquarie Capital (USA) Inc. in Houston, said by telephone.
Additional Oil-Market News:
Crude output at major U.S. shale plays is forecast to fall to 4.55 million barrels a day in August from about 4.65 million in July, according to the EIA monthly Drilling Productivity Report. U.S. crude supplies probably fell 2.1 million barrels last week, according to a Bloomberg survey before government data is released on Wednesday. Cushing, Oklahoma crude stocks declined by 100,000 barrels in the week ended July 15, according to a forecast compiled by Bloomberg. Almost 400 North Sea oil workers will conduct a 24-hour strike on July 26 affecting eight Royal Dutch Shell Plc oil and gas platforms in the North Sea, United Union says in an e-mailed statement. In Nigeria on Friday, Exxon Mobil Corp. declared force majeure on Qua Iboe crude following “a system anomaly observed during a routine check of its loading facility.” In Libya, a sit-in by employees of the Petroleum Facilities Guard over late salaries halted exports at the port of Hariga, according to Arabian Gulf Oil Co.
- With assistance from Grant Smith. To contact the reporter on this story: Jessica Summers in New York at firstname.lastname@example.org To contact the editors responsible for this story: David Marino at email@example.com Carlos Caminada, Debarati Roy
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.