Oil strengthens ahead of G20 meeting, but supply rise caps gains

CNBC

  • Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.
  • U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.
  • International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.

U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.

International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Both markets rose more than 1 percent in early Asian trade.

“We have seen huge increases in supply and the demand picture is in question. However, we might see some movement on global trade issues at the G20 meeting which starts on Friday,” said Michael McCarthy, chief strategist at CMC Markets and Stockbroking.

“I think we are seeing some positioning ahead of those potential demand-positive events.”

Investors in commodity markets are looking ahead to the meeting of leaders of the Group of 20 nations (G20), the world’s biggest economies, on Nov. 30 and Dec. 1, with the U.S.-China trade war at the top of the agenda.

U.S. President Donald Trump is open to a trade deal with China but is also prepared to hike tariffs on imports from the country if there is no breakthrough on longstanding trade issues during a dinner on Saturday with Chinese leader Xi Jinping, White House economic adviser Larry Kudlow said on Tuesday.

Xi said China will widen market access for foreign investors and step up protection of intellectual property rights.

Meanwhile, rising supplies are keeping a lid on prices.

U.S. crude inventories for the week to Nov. 23 added 3.6 million barrels to the most in a year at 450 million barrels, exceeding expectations, the Energy Information Administration said on Wednesday.

“WTI oil is now trading right around the $50 per barrel level, a price last seen well over a year ago, as the current oversupply situation has now manifested itself in 10 consecutive weekly increases in U.S. oil inventories,” said William O’Loughlin, Investment Analyst at Australia’s Rivkin Securities.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members will meet in Vienna, Austria on Dec. 6 to discuss a new round of production cuts of 1 million to 1.4 million barrels per day (bpd) and possibly more, OPEC delegates told Reuters earlier this month.

Oil prices rise on North Sea outage, ahead of OPEC, G20 meetings

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  • The Organization of the Petroleum Exporting Countries will meet at its headquarters in Vienna, Austria, on Dec. 6 to discuss output policy.

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Andrew Burton | Getty Images

Oil prices rose by one percent on Wednesday ahead of an OPEC meeting next week at which the producer club is expected to decide some form of supply cut to counter an emerging glut.

The shutdown of Britain’s largest North Sea oilfield for repairs also supported prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $52.11 per barrel at 0448 GMT, up 55 cents, or 1.1 percent from their last settlement.

International Brent crude oil futures were up 57 cents, or 1 percent, at $60.78 per barrel.

The Buzzard oilfield, which pumps about 150,000 barrels per day (bpd) has closed temporarily after the discovery of pipe corrosion. A smaller field linked to Forties, Total’s Elgin-Franklin, is also shut for maintenance. As a result, trade sources said three cargoes due to load in December had been cancelled.

Despite Wednesday’s rise, oil prices have still lost around 30 percent in value since early October, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

The crude oil price slump since October is so far on par with the 2008 price crash and steeper than that of 2014/2015.

The Organization of the Petroleum Exporting Countries (OPEC) will meet at its headquarters in Vienna, Austria, on Dec. 6 to discuss output policy.

The OPEC-meeting will follow a gathering by the Group of 20 (G-20) nations, which includes the world’s biggest economies, in Argentina this weekend, at which the Sino-American trade dispute as well as oil policy are expected to be discussed.

While most analysts expect some form of supply cut from the OPEC meeting, sentiment in oil markets remains negative.

“Options traders remain focused on downside risks following a 30 percent slide in WTI,” Erik Norland, senior economist at commodities exchange CME Group wrote in a note, referring to the higher number of traders who have placed positions that would profit from a further fall in crude prices than those placing bets on a rising market.

Portfolio managers have slashed their combined net long position in crude futures by a total of 607 million barrels over the last eight weeks, the largest reduction over a comparable period since at least 2013, when the current data series began, exchange data showed.

A concern to global markets is a slowdown in global trade as a result of the Sino-American trade dispute, swelling debt and a strong dollar that puts pressure on emerging markets.

The World Trade Organization (WTO) said in its latest outlook, published on Tuesday, that “trade growth is likely to slow further into the fourth quarter of 2018”, with growth likely at its slowest since Oct. 2016.

Oil weighed down by record Saudi output; markets await G20, OPEC meetings

CNBC

  • Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.
  • International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Ali Jarekji | Reuters
The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.

International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.

Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe.

Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda.

OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.

In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production.

Despite this, most analysts expect OPEC to start withholding supply again soon.

“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank.

“If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.

“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.

Oil prices edge up after nearly 8-percent ‘Black Friday’ plunge

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  • Brent remains below $60 per barrel after an almost 8-percent drop last Friday.
  • The downward pressure comes from surging supply and a slowdown in demand-growth which is expected to result in an oil supply overhang in 2019.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices won back some ground after hefty losses on Friday, but remained under pressure with Brent crude below $60 per barrel amid weak fundamentals and struggling financial markets.

Front-month Brent crude oil futures were at $59.20 per barrel at 0049 GMT, up 40 cents, or 0.7 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures, were up 16 cents, or 0.3 percent, at $50.58 per barrel.

But Monday’s gains did little to make up for the almost 8-percent plunge on Friday, which traders have already dubbed ‘Black Friday’.

Greg McKenna, an independent financial analyst from Australia said there had been an “utter capitulation in crude oil” markets.

The downward pressure comes from surging supply and a slowdown in demand-growth which is expected to result in an oil supply overhang in 2019.

Wider downturn

Beyond weak fundamentals, oil markets are also being impacted by a downturn in wider financial markets.

“2018 clearly marked the end of the 10-year Asia credit bull market due to tightening financial conditions in Asia (especially China), and we expect this to remain the case in 2019,” Morgan Stanley said in a note released on Sunday.

“We don’t think that we are at the bottom of the cycle yet,” the U.S. bank said.

Oil markets have also been weighed down by the strong U.S.-dollar, which has surged against most other currencies this year, thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil, which are seen as more risky than the greenback.

“Anything denominated against the USD is under pressure right now, said McKenna.

Another risk to global trade and overall economic growth is the trade war between the world’s two biggest economies, the United States and China.

“The U.S.-China trade conflict poses a downside risk as we forecast the U.S. to impose 25 percent tariffs on all China imports by Q1 2019,” U.S. bank J.P. Morgan said in a note published on Friday.

Oil falls to lowest since late 2017 on emerging supply glut, OPEC expected to cut

CNBC

  • Global oil supply has surged this year, with the top-three producers — the United States, Russia and Saudi Arabia — pumping more than a third of global consumption.
  • Saudi Arabia is pushing OPEC to cut oil supply by as much as 1.4 million bpd to prevent a supply glut.
  • Shanghai stocks fell the most in five weeks on Friday, by 2.5 percent, amid worries over China’s economic growth and the U.S.-Sino trade war.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices plunged to their lowest since late 2017 on Friday in choppy trading, weighed down by an emerging crude supply overhang and a darkening economic outlook.

To counter bulging supply, the Organization of the Petroleum Exporting Countries (OPEC) is expected to start withholding output after a meeting planned for Dec. 6.

International benchmark Brent crude oil futures fell their lowest since December 2017 at $61.52 per barrel, before recovering to $62.13 by 0741 GMT. That was 47 cents, or 0.8 percent below their last close.

U.S. West Texas Intermediate (WTI) crude futures slumped 2.3 percent, to $53.38 a barrel. Prices earlier fell to as low as $52.82, only 5 cents about the $52.77 level reached on Tuesday, which was the lowest since October 2017.

Amid the plunge, Brent and WTI price volatility has jumped in November to approach levels not seen since the market slump of 2014-2016 and, before that, the financial crisis of 2008-2009.

The divergence between U.S. and international crude comes as surging North American supply is clogging the system and depressing prices there, while global markets are somewhat tighter, in part because of reduced exports from Iran due to newly imposed U.S. sanctions.

Overall, however, global oil supply has surged this year, with the top-three producers – the United States, Russia and Saudi Arabia – pumping more than a third of global consumption, which stands at around 100 million barrels per day (bpd).

“The market is currently oversupplied,” said U.S. investment bank Jefferies on Friday, adding that “an oversupplied market has a difficult time setting a (price) floor.”

High production comes as the demand outlook weakens on the back of a global economic slowdown.

Shanghai stocks fell the most in five weeks on Friday, by 2.5 percent, amid worries over China’s economic growth and doubts over the chances of President Xi Jinping and U.S. President Donald Trump achieving a de-escalation in the Sino-U.S. trade war when they meet next week.

Oil prices have plunged by around 30 percent since their last peaks in early October, as global production started to exceed consumption in the fourth quarter of this year, ending a period of undersupply that started in the first quarter of 2017, according to data in Refinitiv Eikon.

Adjusting to lower demand, top crude exporter Saudi Arabia said on Thursday that it may reduce supply.

“We will not sell oil that customers don’t need,” Saudi Energy Minister Khalid al-Falih told reporters.

Saudi Arabia is pushing OPEC to cut oil supply by as much as 1.4 million bpd to prevent a supply glut.

The group officially meets on Dec. 6 to discuss its supply policy.

U.S. bank Morgan Stanley said it saw “a far greater probability that OPEC reaches an agreement to balance the market in 2019” than not, adding that this would likely support oil prices “in the high-$50s, at least near term.”