CME: Morning Crude Oil Market Report for Tuesday July 3rd

August crude oil prices traded sharply higher during the initial morning hours, supported by hopes for more global central bank intervention to stimulate growth and better than expected Chinese service sector data overnight. Other crude specific fundamentals supporting the morning gain come from the ongoing oil workers strike in Norway that has reduced North Sea output and a growing fear premium in the market in response to reports that Iranian lawmakers have drafted a bill to cut oil tanker traffic in the Straits of Hormuz. Expectations for this week's delayed EIA crude stocks report are for a draw in the range of 2.25 to 2.5 million barrels.

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Brent Crude Dips After Platts Changes Formula

US benchmark crude contracts fell on concerns that the economic recovery in the US is slowing, while Brent crude was on the rise in London as the outlook for the European debt crisis brightened. However, the trends changed late in the week as Brent fell after Platts decided to change the way it calculates the benchmark price. Oil futures on the New York Mercantile Exchange (NYMEX) were hit by a slew of downbeat US data that came out late in the week. Thursday’s employment report from the US Labor Department revealed s surprise increase in US jobless claims to 428,000 last week.

Manufacturing data that was released on the same day also disappointed, showing a decline in the Empire State index from minus-7.7 in August to minus-8.8 in September, while the Philly Fed rose 13.2 to minus-17.5 in September, but still missed expectations. In the meantime, Brent contracts were on the rise, enjoying support from reassuring statements from European politicians that Greece will not quit the euro zone and the EU will go as far as necessary to prevent it from going into a default.

Demand for Brent was also supported by lingering concerns over supplies from the North Sea following a series of delays over the past few weeks. However, Brent futures fell sharply late on Friday after Platts, the energy information arm of McGraw Hill, said it will change the Brent crude pricing formula sooner than expected. The changes to the benchmark that is used to price two third of the world’s oil will come into effect in January 2012 instead of the first quarter of 2013 as was planned before.

Platts has decided to change the pricing benchmark due to a reduction in Brent crude supplies in recent years, which has made it easier for traders to manipulate the market. The Brent crude prices will now be assessed based on contracts signed over a 16 day period instead of the previous 12 day span. “Recent events in the market, including disruptions to the Forties pipeline system and shortfalls in cargo deliveries, show clearly that timely action is needed to maintain the strength of the physical benchmark,” said vice president of editorial at Platts Dan Tanz.


Posted courtesy of Pro Active Investors

U.K. Gas Plunges on Excess LNG, Supplies From North Sea, Norway

U.K. natural gas contracts plunged amid lower than normal demand and excess flows of liquefied gas and fuel from the North Sea and Norway. Wholesale gas for same day delivery dropped as much as 13 pence, or 59 percent, to 9 pence a therm, according to broker ICAP Plc. That’s the lowest since October 2006 and equal to $1.49 a million British thermal units. A therm is 100,000 Btus. It was at 15 pence at 4:40 p.m. in London. Gas for the rest of the working week fell 6 pence to 17 pence a therm. U.K. gas demand in the 24 hours through 6 a.m. tomorrow is forecast at 173 million cubic meters, according to National Grid Plc data. That’s 9 million less than the last working day of last week and 37 million below normal for this time of year as the recession and unseasonably warm weather cut demand.....Complete Story