Light, sweet crude oil prices dropped modestly June 5 to settle below $48/bbl on the New York market while Brent crude also dropped slightly to settle below $50/bbl that day.
The US and Brent crude oil benchmarks swung between gains and losses in early trading on June 6 on concerns about a continuing dispute in the Middle East. Analysts were uncertain how the rift might influence regional transportation of oil supplies.
Saudi Arabia, Egypt, the UAE, and Bahrain cut diplomatic relations with Qatar in a coordinated move. Yemen, Libya’s eastern-based government, and the Maldives joined later.
Qatar denied Saudi accusations that Qatar supports militant groups. Iran urged the sides to overcome their differences. Sudan offered to mediate.
A US State Department official called on all parties to resolve the dispute quickly. Turkey also advocated a settlement, saying President Tayyip Erdogan was working for a diplomatic solution.
Saudi Arabia, Bahrain, and Egypt banned Qatari planes from landing and from crossing their air space.
Analysts said the UAE and Saudi Arabia could be vulnerable to retaliation, noting those countries rely upon Qatar for LNG.
According to O&GJ report, the Royal Bank of Canada issued a note saying the breakdown in Middle Eastern relations poses no immediate risk for gulf energy supplies, but it does have critical strategic implications for US military operations and potentially for Libya.
Helima Croft, RBC global head of commodity strategy, said, “We do not believe that the rift will immediately imperil regional energy security. Egypt is unlikely to close the Suez Canal to Qatari tankers, and at this point, efforts to disrupt Qatari shipments will likely have a marginal effect, absent further deterioration.”
Some analysts have said the Middle Eastern situation could complicate politics among members of the Organization of Petroleum Exporting Countries but Croft noted that Qatar “remains firmly part of the coalition of the willing supporting the OPEC production cuts.”
Croft said the dispute poses questions for US President Donald Trump because US forces use Al Udeid Air Base as a regional headquarters for the US Central Command in counterterrorism operations.
Al Udeid is the staging ground for US air operations in Iraq and Afghanistan. Croft also believes the dispute has “clear implications for the security of energy supplies” in Libya.
The July light, sweet crude contract on the New York Mercantile Exchange fell 26¢ to $47.40/bbl on June 5. The August contract fell 29¢ to close at $47.58/bbl.
The natural gas price for July dropped nearly 2¢ to a rounded $2.98/MMbtu. The Henry Hub cash gas price was $2.91/MMbtu, up 7¢.
Heating oil for July dropped 2.5¢ to a rounded $1.46/gal. Reformulated gasoline stock for oxygenate blending for July fell nearly 4¢ to $1.54/gal.
The Brent crude contract for August on London’s ICE dropped 48¢ to $49.47/bbl on June 5. The September contract fell 43¢ to $49.81/bbl. The June gas oil contract was $430.75/tonne on June 5, down $7.75.
OPEC’s basket of crudes on June 5 was $47.37/bbl, up 5¢.
In addition, Equatorial Guinea’s Ministry of Mines and Hydrocarbons expects offshore production-sharing contracts to be signed by Sept. 15 by six bid-round winners announced at the Africa Oil & Power conference in Cape Town, South Africa.
For a seventh license, ExxonMobil Corp. already has signed a PSC covering Block EG-11, which it acquired through direction negotiation.
Negotiations for PSCs of the open-bidding blocks will begin June 19.
The ministry offered 17 blocks in a bidding round that opened in June 2016. It received expressions of interest from 23 companies and bids from 12 companies.
Winning bidders and their blocks are Ophir Energy, EG-24; Offshore Equator PLC, EG-23; Contarf Energy, EG-18; Elenilto, EG-09; Taleveras, EG-07; and Atlas Petroleum and Strategic Fuel Fund, EG-10.