Oil slips after US rig count rises; Iran concerns cap downside

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  • Oil prices held near more than three-year highs.
  • Rising rig count in the U.S. pointed to higher production.
  • The oil complex has been driven by supply concerns amid prospects of the U.S. reimposing sanctions on Iran.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices edged lower on Monday as a rising rig count in the United States pointed to higher production, but prices held near more than three-year highs and were on track to rise for a second consecutive month.

The oil complex has been driven by supply concerns amid prospects of the United States reimposing sanctions on Iran, while OPEC-led producers continue to withhold supplies.

Brent crude futures, the international benchmark, dipped 34 cents, or 0.5 percent, to $74.30 a barrel in early trading. Prices climbed as high as $75.47 last week, levels not seen since November, 2014.

U.S. West Texas Intermediate (WTI) crude futures were at $67.98 a barrel, down 12 cents, or about 0.2 percent, from their last settlement.

“There’s a small drop in trading this morning but volumes are low and there’s not much commitment in the selling. The overall trend is positive and there’s potential for the market to close higher again today,” said Michael McCarthy, chief marketing strategist at CMC Markets.

“The underlying strength in crude markets is quite impressive and a lot of it is predicated by sanctions… Other than that it’s the demand picture around the globe, and if that continues we could see higher prices.”

U.S. drillers added five oil rigs in the week to April 27, bringing the total count to 825, the highest level since March 2015, General Electric’s Baker Hughes energy services firm said.

“The increase in rigs is modestly bearish for oil prices because increasing rigs is usually associated with increasing supply,” Bill O’Grady, chief market strategist at Confluence Investment Management said in an email.

“However, the increase in rigs was modest and this news is overshadowed by other things, including Angola’s production decline, the potential for an end to the Iranian nuke deal, continued threats by Houthis to Saudi oil shipping and infrastructure.”

U.S. crude production has soared more than 25 percent since mid-2016 to a record 10.59 million barrels per day (bpd). Only Russia currently produces more, at around 11 million bpd.

Brent prices have gained nearly 6 percent this month, buoyed by expectations the United States will renew sanctions.

U.S. President Donald Trump has until May 12 to decide whether to restore sanctions on Iran that were lifted after an agreement over its disputed nuclear program.

“Precisely what happens with Tehran’s nuclear program remains the most significant driver in oil price sentiment,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA.

Exxon’s Darren Woods will break from oil giant’s longstanding CEO silence on quarterly results

DALLAS NEWS

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Wire Services

Darren Woods is breaking with tradition to become the first Exxon Mobil Corp. CEO to sit in on quarterly conference calls with analysts. But it’s not happening until next year.

Woods, who rose to chief executive in early 2017, will participate in the Irving-based company’s fourth-quarter earnings call, typically in late January or early February, Vice President of Investor Relations Jeff Woodbury said Friday in a webcast. In the meantime, a member of his inner circle will answer questions on quarterly calls.

“We believe that the investment community did not have a very good understanding of what our value growth potential was,” Woodbury said Friday during a conference call. “We have taken an extra effort in order to engage with the investment community at all levels of the corporation.”

Exxon CEO Darren Woods(Melissa Repko/Staff)
Exxon CEO Darren Woods
(Melissa Repko/Staff)

For Exxon, the announcement represents a seismic shift in corporate culture as well as a bow to investors and analysts who have said they want more direct access to Woods. Typically Woodbury hosts the calls alone.

Neither of the CEO’s predecessors — Rex Tillerson and Lee Raymond — participated in the quarterly ritual during their combined 24 years leading the company.

The comments follow an earnings report that included the worst first-quarter output since the 1999 merger with Mobil and financial results that fell short of expectations. Exxon reported first-quarter earnings of $4.65 billion, which missed analysts’ estimates despite rapidly rising crude prices.

Crude oil prices are recovering after years of low prices weighing down revenue and profit for Exxon and its peers. Higher prices helped offset higher costs and a drop in production.

The company’s profit jumped 16 percent, with earnings of $1.09 a share, a nickel shy of projections on Wall Street, according to a poll by Zacks Investment Research.

Revenue rose 16.3 percent to $68.21 billion, which easily exceeded analyst expectations of $66.07 billion.

Crude prices are up about $8 per barrel since the beginning of the year.

“Increased commodity prices, coupled with a focus on operating efficiently and strengthening our portfolio, resulted in higher earnings and the highest quarterly cash flow from operations and asset sales since 2014,” Woods said in the earnings announcement.

The Associated Press and Bloomberg

Oil dips, but concerns persist about Iran supplies

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  • Oil prices declined 0.2 percent on Friday morning Asia time, with U.S. crude trading at $68.07 and global benchmark Brent at $74.61 a barrel.
  • Markets were pricing in potential supply disruptions, according to analysts at Australia’s ANZ Bank.
  • That is because President Donald Trump will decide by May 12 whether the U.S. would restore sanctions on Iran that were lifted after an agreement over its disputed nuclear program.
  • If sanctions are restored, it would likely result in a reduction of Iranian oil exports.

Oil prices edged lower on Friday, but Brent largely held gains from the previous session amid concerns that Iran may face renewed sanctions, choking off supply.

Global benchmark Brent crude futures were down 13 cents, or 0.2 percent, at $74.61 a barrel by 0050 GMT, after rising 1 percent on Thursday U.S. West Texas Intermediate (WTI) crude fell 12 cents, or 0.2 percent, to $68.07 a barrel. The contract gained 0.2 percent the previous session.

Brent is heading for a third week of gains, up around 0.7 percent, while WTI faces a small weekly decline.

“Markets continued to price in potential disruptions to world oil supplies if the United States withdraws from the 2015 Nuclear Accord with Iran,” ANZ Bank said in a note.

U.S. President Donald Trump will decide by May 12 whether to restore sanctions on Iran that were lifted after an agreement over its disputed nuclear program, which would probably result in a reduction of Iranian oil exports.

Brent has gained more than 6 percent this month on expectations the United States will renew sanctions.

Concerns about market tightness have also been fueled by the deteriorating situation in Venezuela that has led to a 40 percent decline in crude output in the country in two years.

Nonetheless, further gains have been capped by rising U.S. production as shale drillers ramp up activity in tandem with the rise in oil prices.

Surging U.S. production, which hit 10.59 million bpd last week, has encouraged record-high U.S. exports.

Shell earnings surge to highest level in over 3 years on oil price rally

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Royal Dutch Shell products in Torzhok, Russia.

Andrey Rudakov | Bloomberg | Getty Images
Royal Dutch Shell products in Torzhok, Russia.

Oil giant Royal Dutch Shell posted a 42 percent rise in profits in the first quarter of 2018, underpinned by a recent uptick in oil and gas prices.

Net income attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, and excluding identified items, came in at $5.322 billion from a year ago. This compared to a company-provided analyst consensus of $5.277 billion.

Over the same quarter last year, net income was $3.754 billion.

Here are the key first-quarter metrics:

  • Net income attributable to shareholders (on a current cost of supplies basis and excluding identified items) came in at $5.3 billion, versus $3.8 billion in the previous quarter.
  • Capital investment of $5.183 million in the first three months of 2018 vs. $4.720 as reported a year ago.

“Shell’s strong earnings this quarter were underpinned by higher oil and gas prices, the continued growth and very good performance of our Integrated Gas business, and improved profitability in our Upstream business,” CEO Ben van Beurden said in a statement.

The latest figures come at a time when the environment for oil companies is dramatically improving, amid signs the energy market is rebalancing and crude futures have rallied to multi-year highs.

The main driver for a recent uptick in oil prices has been a supply cut from major oil producing group OPEC and Russia, who started to withhold output in January last year. The production cuts are scheduled to continue throughout 2018.

The move has helped to stabilize oil prices and support oil companies in recent quarters. Brent crude traded at $74.44 a barrel on Thursday morning, up 0.6 percent, while West Texas Intermediate (WTI) was at $68.37 a barrel, 0.4 percent higher.

Shell rival BP is due to report its latest figures for the same quarter on Tuesday.

Oil stable but below recent highs as rising U.S. supplies threaten bull-run

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  • Oil prices stabilized on Wednesday with global benchmark Brent at $74.02 a barrel and U.S. crude at $67.84.
  • Many analysts say that the oil market slump that started in 2014 has ended and that a sustained price rally is likely due to supply disruptions and strong demand — especially from Asia.
  • A report from the American Petroleum Institute on Tuesday said U.S. crude inventories rose by 1.1 million barrels in the week to April 20.

Oil prices were stable on Wednesday, but were below more than three-year highs reached the previous session as rising U.S. fuel inventories and production dragged on an otherwise bullish market.

Brent crude oil futures were at 74.02 per barrel at 0020 GMT, up 16 cents, or 0.2 percent, from their last close, but were some way below the November-2014 high of $75.47 a barrel reached the previous day.

U.S. West Texas Intermediate (WTI) crude futures were up 14 cents, or 0.2 percent, at $67.84 per barrel. That was also off the late-2014 highs of $69.56 a barrel reached earlier in April.

Overall, many analysts say an oil market slump that started in 2014 has now ended and is turning into a sustained price rally due to supply disruptions and also strong demand, especially in Asia.

That’s due to production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market, but also because of political risk to supplies in the Middle East, Venezuela and Africa.

“Market sentiment is turning increasingly bullish towards the commodity,” said Lukman Otunuga, research analyst at futures brokerage FXTM.

Despite this, Otunga said “the sustainability of the rally is a concern” as it was fuelled largely by political risk in the Middle East.

“With rising production from U.S shale still a key market theme that continues to weigh on oil prices, it will be interesting to see how much oil appreciates before bears enter the scene,” he said.

U.S. crude oil production has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd. Only Russia currently produces more, at almost 11 million bpd.

U.S. crude inventories rose by 1.1 million barrels in the week to April 20 to 429.1 million, according to a report by the American Petroleum Institute on Tuesday.

Official weekly U.S. fuel inventory and crude production data will be published later on Wednesday by the Energy Information Administration (EIA).