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Oil futures settled higher on Friday, but still registered a hefty loss for the week

Crude Oil Futures Weekly Outlook: May 8 – 12

by: Investing.com

Oil futures settled higher on Friday, but still registered a hefty loss for the week as signs of rising U.S. shale production continued to feed concerns about a global supply glut.

The U.S. West Texas Intermediate crude June contract tacked on 70 cents, or around 1.5%, to end at $46.22 a barrel by close of trade Friday. It plunged almost 5% on Thursday after hitting its lowest since November 14 at $43.76.

The U.S. benchmark lost $3.11, or almost 6.3%, on the week, the third straight weekly decline, marking the longest losing streak since November.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery ticked up 72 cents to settle at $49.10 a barrel by close of trade. The global benchmark sank to $46.64 a day earlier, a level not seen since November 15.

For the week, London-traded Brent futures recorded a loss of $2.95, or nearly 5.7%.

Crude has been under pressure in recent weeks amid fears that an ongoing rebound in U.S. shale production is derailing efforts by other major producers to rebalance global oil supply and demand.

U.S. drillers last week added rigs for the 16th week in a row, data from energy services company Baker Hughes showed on Friday, implying that further gains in domestic production are ahead.

The U.S. rig count rose by 6 to 703, extending an 11-month drilling recovery to the highest level since August 2015.

The relentless increase in U.S. output has overshadowed pledged output cuts by major producers.

In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.

Saudi Arabia’s OPEC Governor Adeeb Al-Aama said on Friday there is an emerging consensus among OPEC and non-OPEC countries who took part in a global pact to cut crude output on the need to extend the agreement beyond June to help clear a supply glut.

A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

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Oil rebounds on Saudi assurances Russia will extend supply cuts

Business News |

REUTERS

By Scott DiSavino | NEW YORK

NEW YORK Oil prices closed 1.5 percent higher on Friday, rebounding from five-month lows, following positive U.S. jobs data and assurances by Saudi Arabia that Russia is ready to join OPEC in extending supply cuts to reduce a persistent glut.

The market, however, remained in technically oversold territory with futures trading down as much as 19 percent from highs in mid April, prompting some speculators to exit their long positions.

Brent futures gained 72 cents, or 1.5 percent, to settle at $49.10 a barrel, while U.S. West Texas Intermediate crude climbed 70 cents, or 1.5 percent, to close at $46.22 per barrel.

After falling almost 5 percent on Thursday, both contracts continued to collapse overnight with WTI falling to $43.76, its lowest since Nov. 15, and Brent down to $46.64, its lowest since Nov. 30 when the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production during the first half of 2017.

Both benchmarks pared losses after Saudi Arabia’s OPEC Governor Adeeb Al-Aama told Reuters that OPEC and non-OPEC nations were close to agreeing to extend a deal to curb production by 1.8 million barrels per day (bpd) for six months from Jan. 1.

“Based on today’s data, there’s a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet,” the Saudi official said.

OPEC sources said on Thursday that OPEC is likely to extend cuts when it meets on May 25 but that a deeper cut is unlikely.

In the United States, meanwhile, job growth rebounded sharply in April and the unemployment rate dropped to 4.4 percent, near a 10-year low, according to government data.

“The jobs report is extremely positive for the U.S. economy…and should help boost oil demand,” said Mark Watkins, regional investment manager for U.S. Bank’s private client group in Park City, Utah.

Despite gains on Friday, both benchmarks declined for a third week in a row – Brent by about 5 percent and WTI by 6 percent – in their longest losing streak since November.

“The energy complex is slowly succumbing to an opinion that this year’s OPEC production cuts have been ineffective,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

“We feel that the (OPEC) cartel has come to a fork in the road in which the current agreement will be abandoned or steps will need to be taken to double down on current efforts by increasing production curtailments,” Ritterbusch said.

Brent traded volumes on Thursday reached a record high of nearly 542,000 contracts, suggesting that hedge funds had accelerated reductions to their long positions. (tmsnrt.rs/2oSQUu5).

Pierre Andurand, who runs one of the biggest hedge funds specializing in oil, liquidated his fund’s last long positions in oil last week and is running a very reduced risk at the moment, a market source familiar with the development said.

“It is now-or-never for oil bulls,” said U.S. commodity analysis firm The Schork Report. “They either put up a defense here or risk further emboldening the bears for a run at the $40 threshold (for WTI).”

(Additional eporting by Dmitry Zhdannikov in London and Henning Gloystein, Mark Tay and Roslan Khasawneh in Singapore; Julia Simon in New York; Editing by Marguerita Choy and David Goodman)

Oil just dropped to a 5-month low below $46 and analysts say it could go much further

CNBC

  • Benchmark oil futures fell to their lowest levels in five months on Thursday.
  • U.S. crude dropped below $47 a barrel, while Brent breached $50.
  • Analysts see support for U.S. crude around $45 a barrel and then at the $42 level.

Price of oil his 5-month low

Price of oil his 5-month low 

A worker prepares to lift drills by pulley to the main floor of a drilling rig in the Permian basin.

Oil prices plunge to five-month lows 

Oil prices struck a new 2017 low on Thursday as mixed U.S. stockpile data compounded bearishness that has permeated the energy complex in recent weeks.

U.S. West Texas Intermediate crude fell below $46 and international benchmark Brent breached $49, both sinking to the lowest level since Nov. 30, the day the Organization of the Petroleum Exporting Countries agreed to cut output.

Analysts said WTI could eventually decline to $42 now that it broke this key level.

U.S. West Texas Intermediate 3-day performance

The move lower came after the U.S. Energy Information Administration reported a much smaller-than-expected drop in crude oil inventories and another week of soft gasoline demand.

John Kilduff, founding partner at energy hedge fund Again Capital, said there was no one headline moving oil on Thursday. Instead, he chalked it up to more technical trading.

“That $47 level … is huge,” he said.

On Tuesday, oil breached the previous week’s low of $48.20, sparking a round of high-volume, late-afternoon selling.

There is some support around the $45 level, Kilduff said. But if U.S. crude settles below $47 a barrel on Thursday, he believes the contract could plunge to the November lows of $42 a barrel.

Just before noon, U.S. crude broke through a major support zone at $45.90 flagged by Seaport Global Securities earlier in the day. The next critical level is $42.70, the firm said in a morning research note.

Roberto Friedlander, head of energy trading at Seaport Global Securities, pointed to “terrible” demand for refined products, uncertainty around future oil consumption and “what seems like an endless supply of oil.”

An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Futures Now: Oil falls on supply data   

Both Kilduff and Friedlander said oil futures appeared to be getting caught up in a broader sell-off in commodities on concerns about Chinese demand.

Thursday’s sell-off appeared to validate the bearish views of technical traders who analyze charts, said Tom Kloza, global head of energy analysis at Oil Price Information Service.

“Chartists have been the smartest guys in the room, and the smartest guys in the room, their charts say expect something in the $45 to $46 range before this whole chapter is all done,” he said.

Investors are looking forward to OPEC’s May 25 meeting, where the exporter group will decide whether to extend its six-month production cut through the second half of 2017. OPEC and other exporters agreed to reduce output by 1.8 million barrels a day late last year.

While OPEC compliance has been good and many expect the group to extend its share of the cuts, global inventories have so far remained stubbornly high, including in the United States.

A Reuters survey indicating that compliance with the output cut deal fell among some OPEC members in April has weighed on oil prices. News of growing output from OPEC member Libya, which is exempt from the deal, also hurt sentiment.

Price of oil his 5-month low

Price of oil his 5-month low 

Crude Oil: No Pain No Gain

Seeking Alpha

 by: Nima Karamlou
Nima Karamlou

Summary

WTI Crude fell nearly 3% following negative headlines on Libya and OPEC.

Agreement between militants and Libyan government pave the way to higher Libyan output.

Our analysis suggests crude has downside to ~$45 in the short-run, but will be higher by year end.

Overview

WTI crude dropped nearly 3% in midday trade after a wave of bearish news surfaced regarding OPEC and Libya. Crude oil has been a laggard (3.30%) over the month and nearly (10%) in the last 3. Primary drivers of the declines in crude are expected shale ramps (increasing rig count), uncertainty around OPEC, and a reversal of fortunes for Libya.

Source: FactSet

In the energy markets, there will be no gain without pain.

OPEC & Libya In Focus

A Bloomberg article surfaced today citing the recent agreement between the Libyan prime minister, Fayez Al-Sarraj, and the Eastern Commander Khalifa Haftar that will presumably lead to a cease fire. Political upheaval and violence impacted Libyan oil production severely.

Source(s): TradingEconomics, FactSet

Rampant fighting began in 2011, closely followed by volatile swings in production. Libyan oil production that was eclipsing 1.8 mmb/d cratered below 400 tb/d. Production levels had trouble reaching 1 mmb/d during the fighting, but have steadily crept up in 2017. Libyan production has since reached 700 tb/d, falling within our bear case forecast that has Libyan production pegged between 680 tb/d-710 tb/d. It would appear that the Libyans are desperately looking to boost oil production that will provide a steady stream of revenue to the country, which was cut off during the war. The recent peace deal between the militants and the prime minister should allow for such production ramp.

Oil prices drop below $48

CNBC

Oil prices drop below $48 for the first time in over a month

Oil field workers on a rig in Tioga, North Dakota.

Don’t expect oil price to move much higher in coming months: Pro   

Oil prices sharply extended losses just before Tuesday’s settlement, with U.S. crude breaking below $48 a barrel for the first time in more than a month.

U.S. West Texas Intermediate futures and international benchmark Brent crude were both down more than 2 percent. The contracts surrendered gains earlier in the session as rising output in the United States, Canada and Libya offset news of falling production in Russia and OPEC.

U.S. crude was down $1.35, or 2.8 percent, at $47.49 shortly after 3 p.m. EDT, having struck its lowest level since March 27. Brent fell $1.15, or 2.2 percent, to $50.37.

John Kilduff, founding partner at energy hedge fund Again Capital, pointed to a Bloomberg report that the Libyan prime minister and a rival commander had agreed to set up a power-sharing council.

Civil unrest has crimped the country’s oil production due to repeated shutdowns of oil fields and pipelines. Libya is one of two OPEC members exempt from the exporter group’s deal to cut combined production by 1.2 million barrels a day in the first half of 2017.

“The interpretation would be that Libyan production and exports would be increasing in the next couple of months, adding to supplies in an already oversupplied market,” said Andy Lipow, president of Lipow Oil Associates.

On Monday, Libya’s National Oil Co. said production had risen to the highest level since December 2014 and indicated it would continue to increase output, Reuters reported. That has added a bearish sentiment to the market, Lipow said.

Roberto Friedlander, head of energy trading at Seaport Global Securities, also referenced comments by the powerful Saudi deputy crown prince that suggested Riyadh may be ready to resume its battle for market share with other producers.

“The fact is it’s not about one particular headline but more about the fears that are finally coming true; we have watched production cuts hold steady while exports grow,” Friedlander said.

U.S. production “continues to grow hand over fist, and the market will remain well oversupplied given the lack of” refined fuel demand, he added.

Traders are looking forward to an industry report on U.S. crude oil and fuel stockpiles at 4:30 p.m. EDT, to be followed by government data Wednesday at 10:30 a.m. EDT.

Analysts expect a decline of 2.2 million barrels of crude in storage but a rise in fuel inventories, according to a Reuters survey.

Crude Oil Futures – Weekly Outlook: May 1 – 5

Seeking Alpha

Oil futures settled a bit higher on Friday, but still registered a weekly and monthly loss as signs of further gains in U.S. crude output and doubts over whether OPEC will extend output cuts at its May meeting pressured prices.

The U.S. West Texas Intermediate crude June contract tacked on 36 cents, or around 0.7%, to end at $49.33 a barrel by close of trade Friday. It fell to its lowest since March 28 at $48.20 on Thursday.

The U.S. benchmark lost 35 cents, or almost 0.6%, on the week. For April, it fell around 3%, the second straight monthly decline.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery ticked up 23 cents to settle at $52.05 a barrel by close of trade. The global benchmark sank to $51.01 a day earlier, a level not seen since March 27.

For the week, London-traded Brent futures recorded a loss of 38 cents, or nearly 0.5%. The benchmark ended about 2% lower for the month.

Crude has been under pressure in recent weeks amid fears that an ongoing rebound in U.S. shale production is derailing efforts by other major producers to rebalance global oil supply and demand.

U.S. drillers last week added rigs for the 15th week in a row, data from energy services company Baker Hughes showed on Friday, implying that further gains in domestic production are ahead.

The U.S. rig count rose by 9 to 697, extending an 11-month drilling recovery to the highest level since August 2015. The relentless increase in U.S. output has overshadowed pledged output cuts by major producers.

In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.

A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

Saudi Energy Minister Khalid al-Falih said on Friday that it was important to try and agree on an extension of a global oil cuts deal into the second half of the year with both OPEC and non-OPEC members.

Oil prices turn positive as US crude stockpiles fall by 3.6 million barrels, more than expected

CNBC

Getty Images
Rusted out ‘pump-jacks’ in the oil town of Luling, Texas.

Oil prices edged higher on Wednesday after government data showed U.S. crude inventories fell more than expected after an industry report had indicated a surprise build in fuel stocks.

U.S. commercial crude inventories fell by 3.6 million barrels to a total of 528.7 million barrels in the week through April 21, the Energy Information Administration said. The decline came as refineries hiked output and despite a 515,000 barrels-per-day rise in net U.S. crude imports.

U.S. inventory data issued late on Tuesday by the American Petroleum Institute (API) showed crude stockpiles rose 897,000 barrels, defying expectations of a fall of 1.7 million barrels.

U.S. West Texas Intermediate (WTI) was trading up 22 cents at $49.78 per barrel by 10:38 a.m. ET (1438 GMT), after gaining 0.7 percent in the previous session.

North Sea Brent crude, the international benchmark for oil prices, pared losses to trade down 2 cents at $52.08 per barrel. Brent is about 7 percent below its April peak.

show chapters

The line in the sand for crude: Trader

The line in the sand for crude: Trader   

Offsetting the headline crude stockpile data was a rise in fuel inventories, unusual for this time of the year.

Gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 2.7 million barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

U.S. gasoline futures were down 0.7 percent on Wednesday, paring earlier losses and turning positive year to date.

Analysts say lackluster gasoline demand could leave stockpiles of the fuel elevated even through the summer driving season, when consumption surges. That would potentially hurt demand for feedstock crude oil.

Brent and WTI also found support from Saudi Energy Minister Khalid al-Falih, who said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize oil prices.

Man who called oil price collapse now sees this

Man who called oil price collapse now sees this   

OPEC and a handful of big producers, including Russia, pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. Gulf and some other producers have indicated cuts could be extended to the end of 2017. An extension will be discussed when OPEC meets in May.

“The market remains heavy with doubts about OPEC’s ability to achieve a successful extension of the current deal with Russia adopting a lukewarm ‘wait and see’ approach,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The average value of the Brent crude forward curve has fallen by over $5 per barrel since the start of the year, when the OPEC-led supply cut started.

The slump in Brent is a result of record crude oil volumes in circulation on ships around the world. Thomson Reuters Eikon shipping data showed 50 million barrels per day were booked for shipment on tankers this month, up 10 percent since December.

— CNBC’s Tom DiChristopher contributed to this report.

Oil dives, sending U.S. crude below $50 for first time in two weeks

REUTERS

By Julia Simon | NEW YORK

NEW YORK Oil prices tumbled more than 2 percent on Friday, notching the biggest weekly decline in more than a month on mounting evidence that U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 settled at $51.96 a barrel, down $1.03, or 2 percent at the market’s close. U.S. crude futures CLc1 ended at $49.62 a barrel, down 2.2 percent, or $1.09.

Volumes were heavy, with more than 665,000 WTI futures changing hands, surpassing the daily average of 525,000 contracts.

For the week, Brent fell 7 percent, while U.S. crude lost 6.7 percent. It was the largest percentage drop for both benchmarks since the week of March 10, when rising concern about the supply glut undermined big bets on an oil rally.

Those speculative bets have been on the rise again. On Friday, the U.S. Commodities Future Trading Commission (CFTC) showed total long positions in U.S. crude rose in the week to April 18 to their highest in more than a month at 355,077 contracts. But oil has sagged in recent days, much as it did in March.

Many in the market still expect the Organization of the Petroleum Exporting Countries (OPEC) to renew its production cuts for another six months. On Friday an OPEC and non-OPEC member technical committee recommended extending cuts of almost 1.8 million barrels per day (bpd) at the upcoming May 25 meeting.

Still, shipment data shows more oil transiting world oceans than when cuts were put in place.

“The reason that we’re seeing the selloff today and really for this week has been related to the fact that we’re seeing higher waterborne imports arriving from the Middle East,” said Matt Smith, director of commodity research at Clipperdata.

“We should continue to remain well supplied at least over the next few weeks.”

In addition, Russia’s Energy Minister Alexander Novak declined to say whether Russia would adhere to an extension, saying global stocks were declining.

Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, does not expect OPEC to roll over its cuts, saying it could potentially leave the cartel vulnerable to “more stimulus of the U.S. shale oil sector.”

U.S. production, already at its highest since August 2015, looks likely to keep rising. U.S. drillers added rigs for a 14th consecutive week, Baker Hughes said on Friday.

(Additional reporting by Ron Bousso in London, Henning Gloystein in Singapore; Editing by David Gregorio and Chizu Nomiyama)

Oil prices flatten as rise in US production weighs

CNBC

Brent futures were at $52.93 barrel, unchanged from their last close. U.S. crude futures were down 9 cents at $50.50 a barrel.

Both benchmarks had traded more than 50 cents higher earlier in the day, but gains eased at the start of U.S. trading hours.

OPEC vs US output: What’s driving oil? 

“The U.S. market perhaps doesn’t believe in the oil market balance that OPEC would have us believe,” said Hans van Cleef, senior energy economist with ABN AMRO.

OPEC members Saudi Arabia and Kuwait signaled that an effort by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output was likely to be extended beyond June.

But bloated inventories weighed. Despite a drop in U.S. crude stocks last week, an unexpected 1.5-million-barrel build in gasoline stocks drove prices more than 3.5 percent lower on Wednesday.

U.S. crude oil production rose to 9.25 million barrels per day, official data showed, up almost 10 percent since mid-2016.

Patrick Pouyanne, the chief executive of French oil and gas giant Total, said on Thursday prices could fall again by the end of the year due to a rapid increase in U.S. shale production.

“The rebalancing in U.S. crude stocks may have got under way, but concerns about further gasoline builds are rife even as the U.S. summer driving season shifts up a gear,” said Stephen Brennock, an analyst with PVM Oil Associates.

“With questions hanging over U.S. gasoline demand, any further product builds will act as a brake on the oil price recovery,” he said.

Global fuel stocks are well above the five-year average, and Saudi Energy Minister Khalid al-Falih was quoted on Thursday as saying inventories remained elevated in part because traders were selling supplies out of tanker storage.

In China, signs emerged that refiners were using record crude imports to produce more fuel such as gasoline and diesel than the country can absorb.

China’s March gasoline output rose 2.5 percent year-on-year to 11.24 million tonnes, the highest level since at least April 2014, China’s National Bureau of Statistics said, adding fuel into an Asian market that is already well supplied.