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Crude futures settle higher on supply concerns

Washington — Crude futures settled higher Monday, supported by recent supply disruptions, both real and anticipated.

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ICE September Brent settled 96 cents higher at $78.07/b, while NYMEX August WTI settled 5 cents higher at $73.85/b.

NYMEX crude was stronger further out on the curve, with the September contract settling 41 cents higher at $71.98/b and the October contract jumping 71 cents to close at $69.75/b.

Production losses out of Libya, Venezuela and Canada have been supportive for the oil complex.

According to Commerzbank commodities analysts, unscheduled outages in Libya and Canada will offset most of the announced increase in crude oil production, meaning that the oil market will remain tight in the short term.

Moreover, "if shortfalls in Iranian oil supply due to US sanctions then compound the situation in the autumn, there is a risk of the market tightening further," Commerzbank analysts wrote in a daily note.

"Brent should rise further toward the $80[/b] mark in the coming days," they added.

US sanctions targeting Iranian oil exports will go into effect again in November, with some analysts saying more than 1 million b/d of Iranian crude production could be shut in.

Tight takeaway capacity looks to be taking a toll on Permian Basin drilling activity and production.

The Permian currently produces 3.5 million b/d of crude, and should stay fairly flat for the rest of 2018, according to S&P Global Platts Analytics.

The 350,000 b/d Syncrude oil sands facility in Canada is expected to reach full production by early to mid-September, majority-owner Suncor said Monday.

But Suncor said it was looking into advancing some planned maintenance for one of the cokers.

Libya's state-owned National Oil Corporation said Friday that production was averaging 527,000 b/d, down from more than 1 million b/d June 13. And Venezuela's crude production averaged 1.30 million b/d in June, down 60,000 b/d in May, and down 600,000 b/d since June 2017, according to S&P Global Platts estimates.

The Syncrude outage, combined with a lack of takeaway capacity out of the Permian Basin, has been helping to pull crude inventories lower at the Cushing, Oklahoma, NYMEX crude contract delivery point.

Stocks at 27.78 million barrels the week ending June 29 were down from 37.17 million barrels May 4, according to the US Energy Information Administration.

Cushing stocks are "still a big item," said oil consultant Jim Ritterbusch, which are "still heavily influenced by Syncrude."

Analysts that S&P Global Platts surveyed Monday estimate crude stocks fell 4.8 million barrels last week, as refinery demand remains strong while global supply has tightened.

In refined products, NYMEX August ULSD settled 2.73 cents higher Monday at $2.1957/gal, while August RBOB settled 4 cents higher at $2.1485/gal.

--Jeff Mower, jeff.mower@spglobal.com

--Virginie Malicier, virginie.malicier@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com