Oil Falls Below $70, Expected to Rise Again Next Week
Oil saw early gains Friday morning after increased violence in the Niger Delta shut-in oil and gas production. Despite this, oil fell nearly $2 by the close of the New York Mercantile Exchange.
Friday morning, Italian major Eni Spa announced that the Ogoda Manifold-Brass Terminal in the Niger Delta was sabotaged over night. The company immediately shut in 33,000 bopd and 80 MMcf/d of gas production.
This is the second attack in the Niger Delta this week. Just two days ago, Royal Dutch Shell confirmed that one of its pipelines had been attacked. The Movement for the Emancipation of the Niger Delta (MEND) has claimed the attacks.
While intra-day trading for crude oil on the NYMEX was boosted to reach above $72 Friday, the price settled back down below $70. After four weeks of gains, oil reached a seven-month peak of $73.23 on June 11.
For July delivery, crude oil settled on the NYMEX Friday at $69.55 a barrel, and natural gas rose slightly to $4.193 mmBtu.
"It is amazing," said Phil Flynn, vice president and senior market analyst for Alaron Trading in Chicago. "If you'd told people a month ago that we'd have all these problems in the Niger Delta and that prices have continued to go down, I think a lot of people would have been surprised."
Despite the violence and the early reaction, Flynn believes that the reason for the lowering of the price of crude oil has to do more with technical factors.
"The July crude oil futures are expiring on Monday, and I think rather than carry positions into next week or over the weekend, a lot of people because of the uncertainty are just taking profits and looking to reestablish positions next week," Flynn explained. "I think the July expiration is really bringing down prices as we go into the weekend."
Crude oil settled at $71.02 on Friday for August deliveries.
"I think that the market has been very impressive, and we haven't quite been able to break up," the analyst added. "I still think that next week, people are going to start looking at the dollar again and see what the Fed is going to do with the dollar, but if what we're hearing out of the Fed is true -- that they're trying to discourage the market from believing that they're going to be raising interest rates any time soon -- then, I think that oil is still going to be strong next week."
"Oil had a good opportunity to sell off this week," Flynn continued. "It didn't really do it, which leads me to believe that this market still has some legs to the upside, and I think we'll see probably another run back up next week."