Oil prices drop on oversupply concerns as OPEC output increased in July

CNBC

  • Oil prices fell on Tuesday, with Brent futures set for their biggest monthly loss in two years.
  • A report showed OPEC’s output in July rose to its highest for 2018.

An oil pumpjack works at dawn in the Permian Basin oil field on January 20, 2016 in the oil town of Andrews, Texas.

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An oil pumpjack works at dawn in the Permian Basin oil field on January 20, 2016 in the oil town of Andrews, Texas.

Oil prices fell on Tuesday, with Brent futures set for their biggest monthly loss in two years, on oversupply concerns after a report showed OPEC’s output in July rose to its highest for 2018.

September Brent crude futures fell 46 cents, or 0.6 percent, to $74.51 a barrel by 0356 GMT after rising nearly 1 percent on Monday. The September contract expires today and the more-active October contract was down 0.5 percent to $75.20.

U.S. West Texas Intermediate crude futures (WTI) were down 43 cents, or 0.6 percent, at $69.70 a barrel, after rising more than 2 percent in the previous session.

For the month, Brent futures are set to drop 6.2 percent, the most since July 2016, while WTI futures set to decline 5.9 percent to, the biggest monthly drop since March 2017.

A Reuters survey showed the Organization of the Petroleum Exporting Countries (OPEC) increased production in July.

OPEC hiked production by 70,000 barrels per day (bpd) to 32.64 million bpd, the most this year. The group has pledged to reduce the amount of oil output they are curtailing to offset the loss of Iranian supply as looming sanctions have already started to cut exports from OPEC’s third-largest producer.

Commodities tomorrow:

Weaker dollar helps crude push over $70  

U.S. President Donald Trump appeared to soften his approach to Iran, saying on Monday he would meet with President Hassan Rouhani without any preconditions.

This was only a week after he threatened on Twitter to unleash severe consequences on the country.

The United States has indicated that it wants Iranian exports cut to zero under the sanctions it pledged to reintroduce in May and that would go fully into effect in November.

While the market was softer on Tuesday, some support for prices might be found in inventory data to be released this week.

Six analysts polled ahead of reports from the American Petroleum Institute, an industry group, and the U.S. Department of Energy’s Energy Information Administration estimated, on average, that crude stocks fell about 3.2 million barrels in the week ended July 27.

“Inventories are getting really tight at Cushing,” Greg McKenna, chief market strategist at AxiTrader said. “Inventory data is of uber-import right now.”

The API is scheduled to release its data for last week at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the EIA report is due at 10:30 a.m. EDT on Wednesday.

Energy information company Genscape said that inventories at Cushing, Oklahoma, the delivery point for the WTI futures contract, rose almost 200,000 barrels, or nearly 1 percent, from Tuesday to Friday last week, according to traders.

Oil prices mixed; Brent eases as trade tensions weigh

CNBC

  • Oil prices were mixed on Monday with U.S. benchmark WTI nudging higher after four weeks of declines.
  • Brent began the week lower as the fallout from trade tensions weighed on markets.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices were mixed on Monday with U.S. benchmark WTI nudging higher after four weeks of declines, while Brent began the week lower as the fallout from trade tensions weighed on markets.

U.S. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.2 percent, at $68.84 a barrel by 0309 GMT. WTI fell 1.3 percent on Friday.

Brent crude futures fell 5 cents to $74.24 a barrel, after notching up a 1.7 percent weekly increase last week, the first gain in four weeks.

The U.S. economy grew at its fastest pace in nearly four years in the second quarter, but trade tensions remain high between Washington and Beijing despite an easing between the United States and the EU.

“Concerns around the U.S.-China trade wars continue to weigh on prices, while the halt in Saudi shipments through the Red Sea waterway has seemingly failed to provide a bullish fillip,” said Stephen Innes, head of trading APAC at OANDA Brokerage.

Oil prices are in a constructive period, says Helima Croft

Oil prices are in a constructive period, says Helima Croft  

Saudi Arabia last week said it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important tanker routes, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway.

U.S. energy companies added three oil rigs in the week to July 27, the first time in the past three weeks that drillers have increased activity, data released on Friday that showed.

Hedge funds trimmed their bullish wagers on U.S. crude for the second week in a row to the lowest in nearly a month, data also showed on Friday, as oil prices remained volatile amid trade tensions and geopolitical risks.

The speculator group cut its combined futures and options position in New York and London by 11,362 contracts to 412,289 in the week to July 24, the U.S. Commodity Futures Trading Commission said. That was the lowest level since late June, the data showed.2.4 percent.

Russian energy minister Alexander Novak said on Friday the market remained volatile and responded to verbal interventions, adding that the market had priced in risks related to U.S. sanctions against Iran.

Crude oil futures soften as bearish factors come in to play; ICE Brent down to $74.37/b, NYMEX WTI $69.40/b

S&P GLOBAL

London — Crude oil futures were showing signs of shedding their recent gains in European morning trading Friday as a sense of unease in the market and trading activity showing signs of fatigue battled to outweigh the recent bullish geopolitical news and US stock draw.

At 1000 GMT, the September ICE Brent crude futures contract was down 17 cents from the Thursday’s settle at $74.37/b, while the NYMEX WTI September contract was down 21 cents at $69.40/b.

“The softening of the near-term structure points to an underlying sense of unease,” PVM analysts said in a report Friday morning.

Adding to the bearish weight are the signs of fatigue developing in the market.

ICE Brent volumes have declined by a significant 29% between Monday and Thursday of this week, which “bares all the hallmarks of rally fatigue and will do little to underpin meek levels of upside potential,” PVM analysts said.

There is however still plenty of bullish news in the market and “in the absence of any major political or economic turmoil, Brent is likely to remain at above $70/b in the coming weeks,” Commerzbank analysts said in a morning note Friday.

Saudi Arabia, the world’s largest crude exporter, suspended all its oil shipments through the Bab el-Mandeb strait at the southern tip of the Red Sea, following an attack on two VLCCs by Yemeni Houthi militia.

Many market participants were largely unfazed by this event saying that oil trade will not be significantly disrupted by the halting of Saudi Aramco’s shipments through the strait unless the security situation deteriorates.

“The news of Saudi shipments via the Red Sea being suspended had amazingly little impact on the oil price,” Commerzbank analysts said.

Energy Information Administration data released late Wednesday — showing US crude inventories fell 6.15 million barrels to 404.94 million barrels in the week ended July 20 — and rising geopolitical tensions between the US and Iran also appear to have been digested by the market and are no longer providing much in the way of support to the oil complex.

In response to the rising tensions, PVM analysts said “once upon a time, such threats would have propelled oil prices higher…[but now] they offer little in the way of price support with market players having become accustomed to such theatrics.”

Looking towards the US, logistical issues remain, with pipeline capacity insufficient to keep up with rising production in the Permian basin.

“There is unlikely to be much relief until the second half of 2019, when new pipeline capacity is scheduled to start up,” ING analysts said in a note.

Market players will be looking towards the weather moving into next week — especially for any signs of potential hurricanes — as adverse weather conditions can have a significant impact on the oil market, potentially causing severe supply disruptions.

Oil markets inch down after three days of gains

CNBC

  • Oil prices edged down on Friday after three days of gains.
  • Prices were still supported by Saudi Arabia’s halt on transporting crude through a key shipping lane, falling U.S. inventories and easing trade tensions between Washington and Europe.

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil prices edged down on Friday after three days of gains, but were still supported by Saudi Arabia’s halt on transporting crude through a key shipping lane, falling U.S. inventories and easing trade tensions between Washington and Europe.

Brent futures were down 6 cents at $74.48 a barrel by 0043 GMT, after gaining 0.8 percent on Thursday.

U.S. West Texas Intermediate futures were also 6 cents lower, at $69.55, after posting a nearly 0.5-percent gain the previous session.

U.S. President Donald Trump and Jean-Claude Juncker, president of the European Commission, the EU’s executive body, struck a surprise deal on Wednesday that ended the risk of an immediate trade war between the two powers.

A trade war would likely hit demand for commodities like oil, which is used heavily in shipping, construction and other economic activity.

Meanwhile, Saudi Arabia said it was “temporarily halting” oil shipments through the Red Sea shipping lane of Bab al-Mandeb after an attack by Yemen’s Iran-aligned Houthi movement.

Any move to block the Bab al-Mandeb, which is between the coasts of Yemen and Africa at the southern end of the Red Sea, would virtually halt oil shipments through Egypt’s Suez Canal and the SUMED crude pipeline that link the Red Sea and Mediterranean.

An estimated 4.8 million barrels per day of crude oil and refined products flowed through the Bab al-Mandeb strait in 2016 towards Europe, the United States and Asia, according to the U.S. Energy Information Administration.

However, Saudi Arabia has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export. That could offset a bottleneck caused by Bab al-Mandeb’s closure.

Oil climbs after Saudi Arabia suspends shipments through Red Sea lane

CNBC

Oil fracking California

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Brent crude led oil prices higher, extending gains into a third day after Saudi Arabia suspended crude shipments through a strategic Red Sea shipping lane and as data showed U.S. inventories fell to a 3-1/2 year low.

Brent crude futures had risen 47 cents, or 0.6 percent, to $74.40 a barrel by 0247 GMT, after gaining 0.7 percent on Wednesday.

U.S. West Texas Intermediate crude futures were up 5 cents at $69.35 a barrel, after climbing more than 1 percent in the previous session.

“The announcement this morning that the Saudis have closed some shipping lanes in the Gulf because of rebel Houthi attacks also gives the bulls something to launch off,” said Greg McKenna, chief market strategist at AxiTrader, also pointing to the drop in U.S. inventories.

Saudi Arabia, the world’s biggest oil exporter, said on Thursday that it was “temporarily halting” all oil shipments through the strategic Red Sea shipping lane of Bab al-Mandeb after an attack on two big oil tankers by Yemen’s Iran-aligned Houthi movement.

Saudi Energy Minister Khalid al-Falih said in a statement that the Houthis had attacked two Saudi Very Large Crude Carriers in the Red Sea on Wednesday morning, one of which sustained minimal damage.

“Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe,” the minister said.

Most exports from the Gulf that transit the Suez Canal and the SUMED Pipeline also pass through Bab al-Mandeb strait.

An estimated 4.8 million barrels per day of crude oil and refined petroleum products flowed through this waterway in 2016 toward Europe, the United States and Asia, according to the U.S. Energy Information Administration.

The Bab al-Mandeb strait, where the Red Sea meets the Gulf of Aden in the Arabian Sea, is only 20 km (12 miles) wide, making hundreds of ships potentially an easy target.

Prices were also supported by official data showing U.S. crude oil inventories last week tumbled more than expected to their lowest level since 2015 as exports jumped and stocks at the Cushing hub dropped.

Crude inventories fell 6.1 million barrels in the week to July 20, compared with analyst expectations for a decrease of 2.3 million barrels, the EIA said on Wednesday.

At 404.9 million barrels, inventories, not including the nation’s emergency petroleum reserve, were at their lowest level since February 2015.