Brian L. Milne, Energy Editor, Schneider Electric
On the heels of a fresh upside technical breakout on the charts, the nearest delivered gasoline futures contract trading on the New York Mercantile Exchange was under selling pressure following news over the weekend Iran reached a deal with the permanent members of the United Nations Security Council and Germany that eases sanctions against the Islamic nation for its nuclear program.
Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and, ahead of the sanctions, had been the world’s third largest exporter of oil while production had reached 3.3 million barrels per day (bpd) in August 2012.
Western allies, including the Euro zone and the U.S., were successful in imposing a series of economic sanctions against Iran for its nuclear program, which they alleged is designed to produce nuclear weapons. Tehran denies the allegation, while agreeing to halt work on the program for the next six months to allow time for more negotiations.
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While Iranian oil remains sanctioned, the deal implies more oil, as much as 1.1 million bpd, could be added back to the international market. That prospect pressured oil prices over the weekend.
The news comes after NYMEX December Reformulated Blendstock for Oxygenate Blending traded at a $2.7676 gallon 2-1/2 month high on the spot continuation chart Nov. 22, with the bullish upside breakout on the charts following a move to a $2.4945 gallon nearly two-year low Nov. 7. The contract found support in the mid-$2.60s gallon Nov. 25.
Retail prices had moved mostly lower during the fourth quarter, with the Energy Information Administration’s (EIA) U.S. average for all formulation of regular grade sold at retail outlets tumbling to its lowest point since February 2011 on Nov. 11 at $3.194 gallon. The weekly average moved 2.5cts higher to $3.219 gallon on Nov. 18, while 21.0cts lower than a year ago.
Low retail prices have been a factor in pushing up demand. The American Petroleum Institute (API) in their monthly oil market report released Nov. 21 said gasoline deliveries in October, a measure of consumer gasoline demand, were 2.6% higher in October than in September, averaging 8.9 million bpd for the month. It was the highest implied demand rate for an October since 2010, while up 2.6% from October 2012.
About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at [email protected]