West Texas Intermediate crude prices rose above $100 per barrel in early July on the back of a U.S. Energy Information Administration (EIA) report that crude, gasoline and distillate inventory levels are below expectations. In addition, the military coup in Egypt had a positive impact on prices.

While geopolitical events, specifically those in the Middle East, have undoubtedly been a factor in the price increase for oil, Barclays Capital said that impact has been overstated. Instead, the investment firm contends that these factors are supporting prices at early July levels and would likely not push prices much higher.

The most recent and significant factors, in terms of crude price impacts, are the uprising in Egypt and Suez Canal security. “While these geopolitical factors are likely to continue creating various degrees of risk to the supply side, in our view, they are now playing the role of supporting prices at current levels more so than pushing prices higher by acting as a catalyst, especially given the improved supply buffers and the increasing uncertainty surrounding global oil demand growth,” the investment firm said.

Headwinds that are preventing a retracement in prices are an increase in prompt demand for crude; a downturn in economic confidence in the key emerging economies of China, India and Brazil and crude prices are still expensive in domestic currencies, the report said.

While the market is responding to these factors by keeping prices at a higher-than-expected level, given current demand trends prices are not spiking. A large part of this weighted market is that the downside is stable. In short, reactionary moves are smaller than they have been in the past.

What cannot be questioned is the impact that improved crude prices had on heavy natural gas liquids (NGLs) as they experienced solid increases at both the Conway, Kansas, and Mont Belvieu, Texas, hubs in early July after largely decreasing in June. These decreases along the Gulf Coast were due to lessened demand for alkylates and gasoline.

Average NGL prices for June were down across the board at both hubs, aside from Conway isobutane. This was due to an undisclosed isomerization unit being taken offline for service in the Midcontinent, a market more sensitive to outages than the Gulf Coast. A single unit coming offline represents a larger percentage of capacity than at Mont Belvieu.

This artificial increase in demand caused prices to increase 7% to an average of $1.25 per gallon in June from an average price of $1.17 the previous month at Conway. By comparison, Mont Belvieu isobutane prices moved in the opposite direction at nearly the same values. June prices fell 6%.