Middle East Oil Disruption Risk Plunges to 4%
The risk of crude oil supply disruption in the Middle East has dropped to just 4%, according to options traders, Goldman Sachs said in a new note, after Israel and Iran agreed to a ceasefire earlier in the week. The bank’s analysts reported that options traders now see a 60% chance for Brent crude to average between $60 and $70 over the next three months, with the chance of the benchmark topping $70 per barrel at 28%, Reuters wrote. Among the factors driving these expectations, Goldman listed the absence of any disruption during the latest military action in the Middle East, motivation in the U.S. and China to not let oil go much higher, and the prospect of a build in global oil inventories later in the year. Earlier in the week, Goldman Sachs warned that Brent could surge above $100 per barrel in case Iran blocks the Strait of Hormuz. The investment bank said this price could materialize if oil flows via the vital chokepoint were cut by half for a month and remained 10% lower than normal over the next 11 months. After the initial price shock under Goldman’s scenario, Brent would moderate to $95 per barrel over the final quarter of this year, the bank’s analysts also said on Monday. This was a substantial revision of an earlier forecast for oil prices made by the bank last week. Then, Goldman Sachs estimated a geopolitical premium of approximately $10 per barrel on Brent crude, though it suggested oil could exceed $90 if Iranian supply were disrupted. Now that the risk of such a severe disruption is largely gone, forecasts are once again being revised in a hurry. ING analysts said in a note today that they expected OPEC+ to agree the addition of another 411,000 bpd to combined output at its next meeting on July 6, boosting global supply.
Oil Prices Set For Weekly Loss as War Premium Evaporates
Crude oil prices were set to end the week lower than they started it as Israel and Iran stopped bombing each other, alleviating fears of a supply disruption in the Middle East. At the time of writing, Brent crude was trading at $68 per barrel, with West Texas Intermediate at $65.55 per barrel. That’s down from over $77 for Brent crude and $73 per barrel for WTI at the end of last week. Still, both benchmarks inched higher on Thursday this week, after the U.S. Energy Information Administration reported a draw in both crude oil and fuel inventories, and signs of strengthening demand and a ramp-up in refining activity. “The market is starting to digest the fact that crude oil inventories are very tight all of a sudden,” Phil Flynn, an analyst from Price Futures Group, told Reuters. ING analysts, meanwhile, noted that now that the risk of a Middle Eastern supply disruption was off the table, focus would return to tariffs. The U.S. is due to finalise trade agreements with 10 countries after reaching a deal with China earlier in the month. If the other ten deals are successful, which will likely be the case, the tariff threat will also be removed from the oil market, which may provide a boost for demand and, consequently, prices. A cheaper U.S. dollar should also help. The greenback slumped this week on reports President Trump was going to make his Fed chair pick early. Besides the tariff business, ING also noted OPEC+’s next meeting, due to be held on July 6, which the bank’s analysts expect will result in yet another 411,000-bpd production boost. “These supply hikes should ensure that the oil market moves into a large surplus towards the end of the year. This assumes we don’t see a re-escalation in the Middle East, which would lead to supply losses,” Warren Patterson and Ewa Manthey wrote.
ONGC well in Assam capped after 16 days of gas leakage: Hardeep Singh Puri
Union Minister Hardeep Singh Puri on Friday said ONGC has successfully capped the blowout of its crude oil well in Assam’s Sivasagar district after 16 days of gas leakage from there. He said the capping was done without any injury, casualty or fire. “ONGC has successfully capped the blowout of well RDS#147A at 1115 hours hrs today. This blowout started on 12th June and has been capped successfully within shortest possible time following all the best practices,” Puri said in a post on X. He said the crisis management team of Oil and Natural Gas Corporation (ONGC) along with the international well control experts “finally brought the curtains down on the gas well blowout through meticulous planning and concerted efforts in a safe manner, without any injury, casualty or fire, testifying the competency of crisis management”. The minister for Petroleum and Natural Gas also thanked Assam Chief Minister Himanta Biswa Sarma and state government officials for their support to the team on the ground. The blowout took place on June 12 at Well No RDS 147A of Rig No SKP 135 of Rudrasagar oil field of ONGC at Barichuk in Bhatiapar. A private firm, SK Petro Services, was operating the well on behalf of the state-run Maharatna company.
Domestic natural gas price to hit govt ceiling in July
Domestic natural gas price is set to rise to the government-set ceiling of $6.75 per mmbtu next month, from $6.41 currently, as the rate is linked to crude prices, which surged this month due to the Iran conflict. The Centre revises the Administered Price Mechanism (APM) rate every month based on the average crude price of the preceding month. The price is set at 10% of the price of the Indian crude basket, subject to a ceiling of $6.75 per mmbtu. At June’s average crude price of $70 per barrel, the effective rate for July will be $6.75 per mmbtu. CCrude prices have started softening after a ceasefire between Iran and Israel earlier this week, and are currently hovering around $68 per barrel. If the average slips below $67.50 in July, the APM rate for August could fall below the ceiling. Since the government introduced the new pricing formula in April 2023, linking domestic gas to crude oil, prices have mostly remained at the ceiling – first $6.50, and later $6.75 per mmbtu – except in June, when lower crude prices brought the rate slightly down. Prior to April 2023, there was no ceiling price for natural gas, allowing consumers to benefit from lower prices. Under the new regime, prices have generally been higher, squeezing margins for gas distributors and industrial users, while rewarding gas producers.