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Geopolitics boost ANS
ANS near $70 as Ukraine drones gut Russia's fleet of strategic aircraft
Steve Sutherlin Petroleum News
Alaska North Slope crude fell 71 cents June 4 to close at $68.29 per barrel, while West Texas Intermediate slid 56 cents to close at $62.85 and Brent fell 77 cents to close at $64.86.
The day's slide interrupted a two-day rally prompted by geopolitical supply disruption worries after Ukraine unleashed a devastating June 1 drone attack which destroyed valuable Russian military aircraft in far-flung locations around Russia.
(See chart in the online issue PDF)
Crude's losses may have sprung in part due to a report "indicating that Saudi Arabia is exerting considerable pressure for a more aggressive increase in oil supply by OPEC+," XS.com's Antonio Di Giacomo told the Wall Street Journal.
The "kingdom is actively seeking to regain market share, a goal that is driving its desire to accelerate production increases in the coming months," Di Giacomo said.
Even after the drop, ANS scored a Wednesday-to-Wednesday gain of $1.16 from its May 27 close of $67.13 to $68.29 on June 4.
A 4.3 million-barrel drawdown of U.S. commercial crude oil inventories for the week ended May 30, reported by the U.S. Energy information Administration June 4, was overshadowed by a surprise 5.2 million-barrel jump in total motor gasoline inventories.
Analysts answering a Reuters poll had on the average predicted a gasoline inventory rise of just 600,000 barrels.
Distillate fuel inventories over the week increased by 4.2 million barrels to 107.6 million barrels, 16% below the five-year average for the season, the EIA said. At 436.1 million barrels, crude inventories are 7% under the five-year average for the time of year, while gasoline inventories at 228.3 million barrels stand 1% below the five-year average for the time of year.
"The big builds in gasoline and distillates were just head-scratchers, so much so that the market almost dismissed it out of hand," Phil Flynn of the Price Futures Group told the Wall Street Journal.
On June 3, ANS rose 75 cents to close at its peak of the week of $69, WTI rose 89 cents to close at $63.41 and Brent gained a dollar to close at $65.63.
ANS leapt $1.75 June 2 to close at $68.25, as WTI leapt $1.73 to close at $62.52 and Brent added 73 cents to close at $64.63.
Geopolitical premium sparks rally Concerns of escalating hostilities in Europe after Ukraine's June 1 destruction of Russian aircraft overcame bearish sentiment from the June 1 decision by a subgroup of the Organization of the Petroleum Exporting Countries and its allies to return 410,000 barrels per day of production to the market in July.
Moscow conducted reprisal attacks on Kyiv, casting doubt on cease-fire hopes, and raising the specter that Ukraine might target Russia oil facilities, which ING commodities strategist Warren Patterson told Barron's could "change the outlook for the oil market drastically."
Tensions in the Middle East also were simmering. Reuters reported that Iran likely will reject a U.S. nuclear proposal presented over the weekend, scotching near-term lifting of sanctions on Iran's oil and financial sectors.
ANS slumped 97 cents May 29 to close at $66.90, as WTI slumped 90 cents to close at $60.04 and Brent lost 75 cents to close at $64.15.
On May 28, ANS added 75 cents to close at $67.88, WTI jumped 95 cents to close at $61.84 and Brent lifted 81 cents to close at $64.90. Crude prices rose early in the day after a U.S. court ruled that President Donald Trump exceeded his authority in imposing some of his tariffs on imports.
At its close of $68.29 June 4, ANS was at a $5.44 premium to WTI, and at a $3.43 premium to Brent.
Energy investment to hit record level An International Energy Agency report released June 4 said global energy investment is set to jump in 2025 to a record $3.3 trillion despite elevated geopolitical tensions and economic uncertainty.
Investment in oil, natural gas and coal is expected to reach $1.1 billion.
"The fast-evolving economic and trade picture means that some investors are adopting a wait-and-see approach to new energy project approvals, but in most areas we have yet to see significant implications for existing projects," Fatih Birol, IEA executive director said.
Lower oil prices and demand expectations are signaling the first year-on-year reduction in upstream oil investment since the Covid slump in 2020. The 6% CAPEX cut primarily will reflect a decline in the U.S. shale sector.
The geography of energy investment is shifting in ways that imply long-term implications, the report said.
"China is the largest global energy investor by a wide margin," it said. "Meanwhile, global spending on upstream oil and gas is gravitating towards the Middle East."
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