NYMEX Crude $ 47.40 DN $.2600
NY Harbor ULSD $1.4593 DN $.0255
NYMEX Gasoline $1.5381 DN $.0390

NEWS
Oil prices finished lower Monday as Saudi Arabia and three other countries cut ties with Qatar, raising uncertainty about Middle East oil production. Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates all severed diplomatic ties with Doha on Monday, accusing it of meddling in their internal affairs and backing terrorism, which the country denies.

On the New York Mercantile Exchange, July West Texas Intermediate crude fell 26 cents, or 0.6%, to settle at $47.40 a barrel. August Brent crude on London’s ICE Futures exchange slipped 48 cents, or 1%, to $49.47 a barrel. The settlements for both benchmark crudes were the lowest in just under a month.

Oil prices had reversed a gain of more than 1% seen earlier in the European session and in Asian trading. “Generally, increased tensions in the Middle East props up oil prices with a fear bid, but the dynamic of this Qatar issue is different because it is largely between Saudi Arabia and Iran,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch. “The likelihood of military action between the two major OPEC members is pretty slim which means that the chances of production outages is also low,” he said. “The rift, however, is jeopardizing the global production agreement as rising tensions between OPEC members could result in the entire quota-policy-deal falling apart.” Qatar is a member of the Organization of the Petroleum Exporting Countries but isn’t a significant crude producer, market strategists said.

Late last year, OPEC and other non-OPEC members agreed to cut its production by 1.8 million barrels a day to reduce a supply glut. At first, the move lifted global prices, but much of those gains have been erased due to rising output from the U.S. and Libya. The program of cuts has been extended to next March.

Oil has taken a beating, dropping more than 4% last week, the largest weekly decline since early May. Sentiment deteriorated further after data from industry group Baker Hughes on Friday showed U.S. oil drillers adding 11 more active rigs in the week ended June 2—a 20th consecutive weekly rise. U.S. crude production has averaged more than 9.3 million barrels a day for four straight weeks. The government now expects production to reach nearly 10 million barrels a day next year. The Energy Information Administration will issue its month Short-term Energy Outlook report Tuesday.

Meanwhile, the head of Russia’s largest oil producer, Rosneft, expressed doubt that the OPEC cuts would lift oil prices in the long run. He said producers who weren’t included in the reduction pact, like Nigeria and Libya, have been actively increasing output.

Have a great day,

Loren R. Bailey, Founder & Owner
FUEL MANAGER SERVICES INC
“Serving the Trucking Industry Since 1992”