Oil prices fall on US crude stockpile rise, higher supply

CNBC

  • Oil markets have fallen over the last week as Saudi Arabia, other members of OPEC and Russia increased production and as some supply disruptions eased.
  • Investors are also worried about the U.S.-China trade dispute’s impact on economic growth and energy demand.
  • Preliminary data from the American Petroleum Institute showed an unexpected rise of over 600,000 barrels in U.S. crude inventories.

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil benchmark Brent crude hit a three-month low on Wednesday after a rise in U.S. crude inventories highlighted increasing global supply and concerns over weak demand.

Brent futures fell 93 cents to a low of $71.23 a barrel, its weakest since April 17, before recovering slightly to around $71.63 by 8:30 a.m. ET (1230 GMT).

U.S. West Texas Intermediate crude was down 49 cents at $67.59, not far off Tuesday’s one-month low of $67.03 per barrel.

Oil markets have fallen over the last week as Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and Russia increased production and as some supply disruptions eased.

Crude oil prices under pressure as supplies increase

Crude oil prices under pressure as supplies increase  

“The correction in the oil price represents something of a convergence between fundamentals and physical realities,” said David Reid, lead crude market analyst at consultancy JBC Energy.

“We expect a fairly rapid lengthening in the (global oil supply) balance,” Reid added.

The U.S. oil market has been tight this year but data on Tuesday from the American Petroleum Institute showed an unexpected rise of over 600,000 barrels in crude inventories. Analysts had forecast a decline of 3.6 million barrels in U.S. crude stocks for the week through July 13.

Data from the U.S. government’s Energy Information Administration is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

“Oil is trading lower this morning on the back of the API release, and price action later today will largely depend on what the EIA release,” said ING commodities strategist Warren Patterson.

“A number broadly similar to the API could put some further pressure on the market later this afternoon.”

Jackie DeAngelis commodity hit

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Investors have also begun to worry about the impact on economic growth and energy demand of the trade dispute between the United States and its trading partners, including China.

Trade tension between the United States and China could drag on the global economy, BMI Research said.

“The economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity,” BMI said. “Slowing trade growth will weigh on physical

demand for oil.”

Kansas City Federal Reserve Bank President Esther George said on Tuesday uncertainty over U.S. trade policy could slow the economy, even if recently imposed tariffs are too small to have a big impact.

Trade policy was a “significant” downside risk to the outlook for economic growth, George said.

Oil climbs from 3-month low as more oil workers strike in Norway

CNBC

  • Brent crude prices rose from a three-month low on Tuesday after more oil workers went on strike in Norway.
  • The market has been dominated by oversupply issues in recent days.

Oil fracking

David McNew | Getty Images

Brent crude prices rose from a three-month low on Tuesday after more oil workers went on strike in Norway, supporting a market that has been dominated by oversupply issues in recent days.

Brent crude futures had climbed 28 cents, or 0.4 percent, to $72.12 a barrel by 0331 GMT. They fell 4.6 percent on Monday, at one point touching their lowest since mid-April.

U.S. West Texas Intermediate futures were down 1 cent at $68.05. They fell 4.2 percent on Monday.

An oil worker strike in Norway intensified on Monday when hundreds more walked out in a dispute over pay and pensions after employers failed to respond to union demands for a new offer.

The strike, which began last Tuesday, has had a limited impact on Norway’s oil production so far, but some drillers warned of possible contract cancellations if the dispute goes on for a month or more.

“The threat of further supply disruptions hasn’t totally evaporated,” ANZ said in a morning note.

ANZ also said that “production from Libya remains susceptible to further declines, despite its ports reopening”.

While Libyan ports are reopening, output at the Sharara oilfield was expected to fall by at least 160,000 barrels per day (bpd) after two workers were abducted by an unknown group, the National Oil Corporation said on Saturday.

On July 11, the NOC said four export terminals were being reopened after eastern factions handed over the ports, while a lengthy shutdown at the El Feel oilfield in the southwest also ended. Two days later, output at the nearby 300,000 bpd Sharara was slashed.

U.S. oil output from seven major shale formations is expected to rise by 143,000 bpd to a record 7.47 million bpd in August, the U.S. Energy Information Administration said in a monthly report on Monday.

Production is expected to climb in all seven formations, with the largest gain of 73,000 bpd seen in the Permian Basin of Texas and New Mexico. All shale regions except for Appalachia are at a high, according to the data.

Oil prices dip as markets eye potential supply increases 

CNBC

  • Oil prices fell on Monday as concerns about supply disruptions eased and Libyan ports resumed export activities.
  • Traders eyed potential supply increases by Russia and other oil producers.

Pump jacks and wells are seen in an oil field on the Monterey Shale formation, March 23, 2014, near McKittrick, Calif.

Getty Images
Pump jacks and wells are seen in an oil field on the Monterey Shale formation, March 23, 2014, near McKittrick, Calif.

Oil prices fell on Monday as concerns about supply disruptions eased and Libyan ports resumed export activities, while traders eyed potential supply increases by Russia and other oil producers.

Brent crude futures were down 26 cents, or 0.4 percent, at $75.07 a barrel at 0057 GMT.

U.S. West Texas Intermediate (WTI) crude was down 27 cents, or 0.4 percent, at $70.74 a barrel.

Supply outages in Libya and strike action in Norway and Iraq pushed oil prices higher late last week, although prices still ended down for a second straight week.

“Crude oil prices fell as fears of supply disruptions eased. News that Libya’s state oil producer had restarted output from a major oil field ignited the selloff earlier in the week,” ANZ Bank said in a note.

The market focus shifted towards possible supply increases, even as a Norwegian union for workers on offshore oil and gas drilling rigs stepped up a six-day strike.

Russia and other major oil producers may increase output further should supply shortages hit the global oil market, Russian Energy Minister Alexander Novak said on Friday.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA, said U.S.-China trade tensions “should subside this week and could be a possible plus for oil prices,” but a possible sale of U.S. oil reserves would weigh on prices.

“With the Trump administration actively considering tapping into the nation’s Strategic Petroleum Reserve, it could weigh negatively,” Innes said.

The United States holds a reserve of about 660 million barrels, and the Trump administration was considering drawing on the country’s oil reserve, which would increase supply, according to a Bloomberg report.

Meanwhile, the number of rigs drilling in the United States remained unchanged at 863 in the week to July 13 as the rate of the growth slowed amid a fall in crude prices.

Oil edges lower, set for big weekly decline

CNBC

  • Oil prices edged lower on Friday and were set for a second weekly fall.
  • The market shrugged off a warning that spare capacity may be stretched as OPEC and Russia increase production.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices edged lower on Friday and were set for a second weekly fall, as the market shrugged off a warning that spare capacity may be stretched as OPEC and Russia increase production.

Brent crude eased 36 cents, or 0.5 percent, to $74.09 by 0326 GMT. On Thursday it gained $1.05 a barrel, rebounding from a session low of $72.67. It is heading for a weekly fall of nearly 4 percent.

U.S. crude dipped 4 cents to $70.29, after a five cent decline in the previous session. It is heading for a weekly decline of nearly 5 percent.

It has been a wild week for oil prices with both the main benchmarks suffering heavy losses on Wednesday as traders focused on the return of Libyan oil to the market amid concerns about a China-U.S. trade war.

However, a warning on spare capacity by the International Energy Agency (IEA) pushed Brent higher on Thursday, helping it recoup some losses.

“It is a tough market,” said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo. “I think it is supported by relatively strong demand and inventories are falling, but if you look a little bit ahead U.S. shale oil just continues to grow and then it depends on what goes on with OPEC.”

The Organization of the Petroleum Exporting Countries (OPEC) and other key producers including Russia have responded to the recent market tightness by easing a supply-cut agreement.

The IEA cautioned that the world’s oil supply cushion “might be stretched to the limit” due to production losses in several different countries.

“Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit,” the Paris-based IEA said in its monthly report.

“This vulnerability currently underpins oil prices and seems likely to continue doing so,” the agency said.

China’s crude oil imports fell for a second month in a row in June as shrinking margins and volatile oil prices led some independent refiners, known as “teapots”, to scale back purchases, official data showed on Friday.

Brent oil gains $1 to claw back some losses

CNBC

  • Brent crude rose more than $1 on Thursday, recouping some ground after its biggest one-day drop in two years in the previous session.
  • Those declines came on news that Libya would resume oil exports and U.S.-China trade tensions.

An oil pumpjack operates near Williston, North Dakota.

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

Brent crude rose more than $1 on Thursday, recouping some ground after its biggest one-day drop in two years in the previous session on news that Libya would resume oil exports and U.S.-China trade tensions.

Brent crude rose $1.31, or 1.8 percent, to $74.71 by 0242 GMT after slumping 6.9 percent on Wednesday.

U.S. West Texas Intermediate (WTI) added 42 cents, or 0.6 percent, to $70.80, after falling 5 percent the previous session.

“Markets in Asia are a lot more settled today,” said Greg McKenna, chief market strategist at AxiTrader in Sydney.

“Moves, the like of which we saw in Brent and to a lesser extent WTI, last night are often followed by some sort of bounce the following day or session,” he said.

The announcement by Libya’s National Oil Corp that four export terminals were being reopened, ending a standoff that had shut down most of Libya’s oil output, was one of the catalysts for a correction, analysts said.

The reopening allows the return of as much as 850,000 barrels per day of crude into international markets, while an escalating U.S.-China trade row has raised concerns about demand.

Oil had some supportive news late on Wednesday that U.S. crude oil stocks fell by nearly 13 million barrels last week, the most in nearly two years, dropping overall crude stocks to their lowest point since February 2015.

The decline in overall inventories was partially due to a fall-off in stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures, which were down by 2.1 million barrels.

“For WTI there is tightness at Cushing, which will be supportive over July and August,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

Supply to the U.S. market has also been squeezed by the loss of some Canadian oil production.