Oil prices drop as escalating US-China trade war clouds demand outlook

CNBC

  • Market watching trade war impact on crude demand.
  • U.S. sanctions on Iran continue to support prices.
  • U.S. shale output expected to rise in October.

Oil markets fell on Tuesday as the latest escalation in the Sino-U.S. trade war clouded the outlook for crude demand from the two countries, which are the world’s top two oil consumers.

Brent crude futures dropped 44 cents, or 0.6 percent, to $77.61 per barrel by 0424 GMT.

U.S. West Texas Intermediate (WTI) crude was down 28 cents, or 0.4 percent, to $68.62 per barrel.

U.S. President Donald Trump on Monday said he would impose 10 percent tariffs on about $200 billion worth of Chinese imports.

“The growing trade dispute has hurt trading sentiment. The impact on economic growth is slowly dripping in, which again hurts oil prices,” Wang Xiao, head of crude research at Guotai Junan Futures, said on Tuesday.

Refineries in the United States consumed about 17.7 million barrels per day (bpd) of crude oil last week while China’s refiners used about 11.8 million bpd in August, according to government data from the countries, the most among the world’s countries.

The tariffs are likely to limit economic activity in both the China and the United States and that should lower oil demand growth as less fuel is consumed to move goods for trade.

The countries are the world’s two largest economies.

However, potential supply cuts caused by U.S. sanctions on Iran, the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC), are providing some support for oil prices.

Sanctions affecting Iran’s petroleum sector will come into force from Nov. 4.

Iranian crude oil export loadings have declined by 580,000 bpd in the past three months, Bank of America Merrill Lynch analysts said in a note to clients.

Meanwhile, oil output from seven major U.S. shale formations is expected to rise by 79,000 bpd to 7.6 million bpd in October, the U.S. Energy Information Administration said on Monday.

Technical analysis from Reuters market analyst Wang Tao showed that U.S. oil prices have repeatedly failed to overcome a resistance level of $69.85 per barrel, signalling a dissipation of positive outlook.

Brent may fall more than $1 to $76.37 a barrel while WTI crude prices may revisit the Sept. 14 low of $67.94, he wrote.

On Monday, Russia’s Energy Minister Alexander Novak said that OPEC and non-OPEC members will discuss all possible supply scenarios when they meet this month in Algeria. Russia, the world’s largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

Oil prices ease as trade row clouds demand outlook

CNBC

  • Oil prices dipped on Monday as worries that the U.S. could impose additional tariffs on China outweighed concerns over the supply impact of impending sanctions by Washington on Iran.
  • U.S. President Donald Trump is expected to announce fresh tariffs on Chinese imports worth approximately $200 billion as early as Monday, according to a source which spoke to Reuters.

Global oil prices eased in early Asian trading on Monday on concerns that the United States is poised to impose additional tariffs on China, outweighing supply fears from upcoming sanctions on Iran.

Brent crude oil futures dipped 16 cents, or 0.2 percent to $77.93 a barrel by 0035 GMT.

U.S. West Texas Intermediate (WTI) futures fell 20 cents or 0.3 percent, to $68.79 a barrel.

“The market’s expectation of shortages has cooled after data from last week showed increases in supplies, while investors have lowered the outlook for oil demand,” said Wang Xiao, head of crude research with Guotai Junan Futures.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

The escalating trade row is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from upcoming U.S. sanctions on Iran over its nuclear program.

Refiners in India, Iran’s second largest crude buyer will cut their monthly crude loadings from Iran for September and October by nearly half from earlier this year.

Also weighing on oil prices, U.S. drillers added two oil rigs in the week to Dec. 1, bringing the total count up to 749, the highest since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

Oil prices claw back some ground, but demand worries drag

CNBC

  • Oil prices saw a partial recovery on Friday.
  • Worries over emerging markets and the U.S.-China trade dispute continue to weigh on sentiment over future growth in oil demand.

Oil on Friday clawed back some of its losses from the previous session, when prices fell the most in a month, as concerns about oil supply are countering worries that emerging market crises and trade disputes could dent demand.

Brent crude was up 8 cents, or 0.1 percent, at $78.26 a barrel by 0338 GMT, after falling 2 percent on Thursday. The global benchmark rose on Wednesday to its highest since May 22 at $80.13.

U.S. West Texas Intermediate (WTI) futures were up 18 cents, or 0.2 percent, at 68.76 a barrel, after dropping 2.5 percent on Thursday.

Brent is heading for a 1.8 percent gain this week, while WTI is on track for a 1.5 percent increase.

“Prices remain well supported as the market continues to fret about ongoing structural supply issues elsewhere,” ANZ Research said in a note.

The International Energy Agency on Thursday warned that although the oil market was tightening at the moment and world oil demand would reach 100 million barrels per day (bpd) in the next three months, global economic risks were mounting.

“As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the U.S. dollar, raising the cost of imported energy,” the agency said.

“In addition, there is a risk to growth from an escalation of trade disputes,” the Paris-based agency said.

China will not buckle to U.S. demands in any trade negotiations, the major state-run China Daily newspaper said in an editorial on Friday, after Chinese officials welcomed an invitation from Washington for a new round of talks.

U.S. President Trump said on Twitter on Thursday that the United States holds the upper hand in talks.

“We are under no pressure to make a deal with China, they are under pressure to make a deal with us,” Trump tweeted.

Still, supply concerns are supported by data showing that U.S. crude production fell by 100,000 bpd to 10.9 million barrels per day last week as the industry faces pipeline capacity constraints.

Though weekly output slipped, the United States likely surpassed Russia and Saudi Arabia earlier this year to become the world’s largest crude oil producer, based on preliminary estimates from the Energy Information Administration.

Although the EIA does not publish crude production forecasts for Russia and Saudi Arabia in its short term outlook, it expects that U.S. output will continue to exceed Russian and Saudi production for the remaining months of 2018 and through 2019.

The loss of Iranian oil to the market as refiners are cutting or halting purchase ahead of U.S. sanctions in November is also raising concerns about supply.

Oil prices slip as economic growth concerns counter tighter supplies

CNBC

  • U.S. industry start to feel pain of tariffs — survey.
  • OPEC warns of economic slowdown, cuts oil demand forecast.
  • But supply tightens as U.S. sanctions against Iran loom.
  • U.S. crude stocks, output drop.

Oil prices fell on Thursday, reversing some of the strong gains from the previous session, as economic concerns raised doubts about ongoing fuel demand growth.

U.S. West Texas Intermediate (WTI) crude futures were at $69.91 per barrel at 0220 GMT, down 46 cents, or 0.6 percent, from their last settlement.

Brent crude futures slipped 38 cents, or 0.5 percent, to $79.36 a barrel.

The falls came on the back of a potential slowdown in fuel demand growth because of trade disputes between the United States and China as well as emerging market turmoil.

American companies in China are being hurt by tariffs in the growing trade war between Washington and Beijing, according to a survey of hundreds of firms, prompting the U.S. business lobbies behind the poll to urge the Trump administration to reconsider its approach.

The Trump administration has invited Chinese officials to restart trade talks, just as Washington prepares to escalate the U.S.-China trade war with tariffs on $200 billion worth of Chinese goods.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday reduced its forecast for 2019 global oil demand growth, pointing to economic risks.

In its monthly report, OPEC said world oil demand next year would rise by 1.41 million barrels per day (bpd), 20,000 bpd less than last month and the second consecutive reduction in the forecast.

Tighter supply

Despite this, the short-term outlook for oil markets is for tighter supply.

Brent rose above $80 per barrel the previous session for the first time since May, spurred by expectations that U.S. sanctions against Iran’s oil exports, which will start in November, will tighten global markets.

WTI was pushed over $70 the previous session due to falling crude inventory and production levels.

U.S. crude inventories fell 5.3 million barrels in the week to Sept. 7 to 396.2 million barrels, the lowest since February 2015 and about 3 percent below the five-year average for this time of year, the U.S. Energy Information Administration (EIA) said on Wednesday.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said the inventory data showed “a much deeper drop than analyst’s expectations.”

U.S. crude oil production fell by 100,000 bpd, to 10.9 million bpd, as the industry faces pipeline capacity constraints.

Innes said the slight dips on Thursday came as rising refined product inventories, which the EIA also reported, “slightly dampened market overexuberance” as it indicated that U.S. fuel demand may be weakening.

Gasoline stocks rose 1.3 million barrels, while distillate stockpiles , which include diesel and heating oil, climbed by 6.2 million barrels, the EIA data showed.

Oil prices rise on lower U.S. crude inventories, looming Iran sanctions

CNBC

  • American Petroleum Institute reports 8.6 million-barrel decline in crude inventories.
  • Russia warns of fragile oil market but says it can raise output.
  • Hurricane Florence to hit U.S. East Coast on Friday.

Oil prices rose on Wednesday following a report of declines in U.S. crude inventories and as looming sanctions against Iran raised expectations of tightening supply, while top producer Russia warned of a fragile global crude market.

U.S. West Texas Intermediate (WTI) crude futures were at $69.84 per barrel at 0428 GMT, up 59 cents, or 0.9 percent, from their last settlement. WTI futures gained 2.5 percent in the previous session.

Brent crude futures climbed 28 cents, or 0.4 percent, to $79.34 a barrel. Brent has climbed for four straight sessions, gaining 2.2 percent the previous day.

“Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million barrels, the American Petroleum Institute (API), a private industry group, said on Tuesday.

Official weekly government data will be published by the U.S. Energy Information Administration (EIA) on Wednesday.

Regarding crude oil production, the EIA said on Tuesday it expected U.S. output to rise by 840,000 barrels per day (bpd) between 2018 and 2019 to 11.5 million bpd, lower than a rise of 1.02 million bpd to 11.7 million that was previously forecast.

Outside the United States, traders have been focusing on the impact of U.S. sanctions against Iran that will target oil exports from November.

Washington has put pressure on other governments to also cut imports, and many countries and companies are already falling in line and reducing purchases, triggering expectations of a tighter market.

“Fragile” market

Russian energy minister Alexander Novak on Wednesday warned of the impact of U.S. sanctions against Iran.

“This is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil will act. The situation should be closely watched, the right decisions should be taken,” he said.

Novak said global oil markets were “fragile” due to geopolitical risk and supply disruptions.

“It is related to the fact that not all the countries have managed to restore their market and production,” he said, referring to outages and falling production in Mexico and Venezuela.

Should markets overheat and prices spike, however, Novak said Russia could boost its output.

“Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016,” he said.

That month Russia produced 11.247 million bpd, a post-Soviet Union record-high.

Oil markets were also eyeing Hurricane Florence offshore the United States amid surging demand for gasoline and diesel.

The storm is expected to make landfall on the U.S. East Coast on Friday, and has caused fuel shortages as millions of households and businesses have evacuated.

Front-month gasoline futures rose 0.5 percent on Wednesday, while heating oil futures increased 0.4 percent.