Oil dips on swelling US inventories, but expected OPEC supply cut stems losses

CNBC

  • U.S. commercial crude oil inventories rose to their highest level since December 2017 last week, according to a weekly report by the Energy Information Administration.
  • The Middle East-dominated producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) next meets on Dec. 6.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Getty Images
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Oil prices dipped on Thursday after U.S. crude inventories increased to their highest level since December 2017 amid concerns of an emerging global glut, although an expected supply cut by producer cartel OPEC prevented further drops.

U.S. West Texas Intermediate (WTI) crude futures, were at $53.38 per barrel at 0141 GMT, 25 cents, or 0.5 percent below their last settlement.

Front-month Brent crude oil futures were at $63.28 per barrel, down 20 cents, or 0.3 percent, from their last close.

U.S. commercial crude oil inventories rose by 4.9 million barrels to 446.91 million barrels last week, the Energy Information Administration (EIA) said in a weekly report on Wednesday. That was the highest level since December last year.

U.S. crude oil production remained at a record 11.7 million barrels per day (bpd), the EIA said.

“U.S. inventory data…continued to show significant supply builds, which comes on the back of sustained record U.S. crude oil production,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Some analysts have warned that despite high global production, oil markets have little spare capacity to handle unforeseen supply disruptions.

However, Innes said that once U.S. pipeline bottlenecks were alleviated, which he said he expected in 2019, “the entire notion of a tight global spare capacity argument goes down the well”.

Fearing a glut, the Middle East-dominated producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) is considering supply cuts when it next meets on Dec. 6, although some members, like Iran, are expected to resist any voluntary reductions.

“While there is talk that OPEC plus Russia may again agree to a production cut, the concern is that not all relevant parties will be able to come to an agreement,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

“Saudi Arabia has hinted at a unilateral cut, but it will want to be careful about annoying the U.S. given that President Trump has been vocal about his desire for lower oil prices,” he added.

Trump on Wednesday praised Saudi Arabia over recent oil prices and called for prices to go even lower.

“Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy!… Thank you to Saudi Arabia, but let’s go lower!” Trump tweeted.

Oil bounces above $63 after slide, but glut worries persist

CNBC

  • American Petroleum Institute says U.S. crude oil inventories are falling.
  • Fearing a glut, OPEC pushes for a supply curb.
  • Trump support for Saudi Arabia makes oil supply cut harder, say analysts.

Oil bounced above $63 a barrel on Wednesday to claw back some of the previous day’s 6 percent plunge, lifted by a report of an unexpected decline in U.S. crude inventories.

The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories last week fell by 1.5 million barrels, easing concerns for now that a supply glut is building up.

“The move yesterday was extremely sharp; after such moves you expect to have some rebound,” said Olivier Jakob, analyst at Petromatrix. “The API reported a stock draw – it is not a big one but at least it’s not a 10-million-barrel build.”

Brent crude, the global benchmark, was up 92 cents to $63.45 per barrel at 0944 GMT and traded as high as $63.67. U.S. crudegained 98 cents to $54.41.

Yet Wednesday’s bounce did little to reverse overall market weakness. Crude fell more than 6 percent in the previous session and world equities tumbled as investors grew more worried about economic growth prospects.

Brent has fallen by more than 25 percent since reaching a 4-year high of $86.74 on Oct. 3, reflecting concern about forecasts of slowing demand in 2019 and record supply from Saudi Arabia, Russia and the United States.

Worried by the prospect of a new supply glut, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.

OPEC, plus Russia and other non-OPEC producers, is considering a supply cut of between 1 million barrels per day (bpd) and 1.4 million bpd at a Dec. 6 meeting, sources familiar with the issue have said.

Still, Saudi Arabia may find taking action to support prices harder, analysts say, given U.S. pressure to keep them low and President Donald Trump standing by the Saudi crown prince in the wake of the murder of journalist Jamal Khashoggi.

Trump vowed on Tuesday to remain a “steadfast partner” of Saudi Arabia despite saying that Saudi Crown Prince Mohammed bin Salman may have known about a plan to murder Khashoggi.

“It is more difficult to expect a supply cut when you have the U.S. president giving full support to Saudi Arabia and asking Saudi to maintain low prices,” Jakob said.

Analysts at JBC Energy said Trump’s statement “highlights the potential for political fallout for Saudi itself from a hefty cut in production.”

Oil rises on expected OPEC cut, but markets remain wary 

CNBC

  • The Organization of the Petroleum Exporting Countries (OPEC), de-facto led by Saudi Arabia, is pushing for the producer cartel and its allies to cut 1 million to 1.4 million barrels per day (bpd) of supply.
  • Despite Monday’s gains, crude prices remain almost a quarter below their recent peaks in early October, weighed down by surging supply and a slowdown in demand growth.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Getty Images
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Oil prices rose on Monday as traders expected top exporter Saudi Arabia to push producer club OPEC to cut supply towards the end of the year.

Despite that, market sentiment remains weak on signs of a demand slowdown amid deep trade disputes between the world’s two biggest economies, the United States and China.

Front-month Brent crude oil futures, the international benchmark for oil prices, were trading at $67.29 per barrel at 0045 GMT, up 53 cents, or 0.8 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures, were up 61 cents, or 1.1 percent, at $57.07 per barrel.

“The market’s bullish radar is still waiting for OPEC+ to deliver a sizeable cut number,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

The Organization of the Petroleum Exporting Countries (OPEC), de-facto led by Saudi Arabia, is pushing for the producer cartel and its allies to cut 1 million to 1.4 million barrels per day (bpd) of supply to adjust for a slowdown in demand growth and prevent oversupply.

Despite Monday’s gains, crude prices remain almost a quarter below their recent peaks in early October, weighed down by surging supply and a slowdown in demand growth.

On the demand-side, Japan’s October crude oil imports – which are the world’s fourth biggest, but which are in structural decline because of a falling population and improving energy efficiency – fell by 7.7 percent from the same month last year, to 2.77 million barrels per day (bpd), the Ministry of Finance said on Monday.

This comes as supply in the United States is surging.

U.S. energy firms added two oil rigs in the week to Nov. 16, bringing the total count to 888, the highest level since March 2015, a weekly report by energy services firm Baker Hughes said on Friday.

The rising drilling activity points to a further increase in U.S. crude oil production, which has already jumped by almost a quarter this year, to a record 11.7 million bpd.

Put off by a surge in supply and the slowdown in demand, financial markets have been becoming increasingly wary of the oil sector, with money managers cutting their bullish wagers on crude futures and options to the lowest level since June 2017, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

The speculator group cut its combined futures and options positions on U.S. and Brent crude during the week ended Nov. 13 to the lowest since June 27, 2017.

Oil rises on expected OPEC cuts, but surging US supply drags

CNBC

  • Oil prices on Friday were mainly supported by expectations that the Organization of the Petroleum Exporting Countries would start withholding supply soon.
  • Meanwhile, U.S. crude oil production reached another record last week.

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Andrew Burton | Getty Images

Oil prices rose on Friday amid expectations of supply cuts from OPEC, although record U.S. production dragged.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.84 per barrel at 0353 GMT, up 38 cents, or 0.7 percent, from their last settlement.

Brent crude oil futures were up 48 cents, or 0.7 percent, at $67.10 per barrel.

Prices were mainly supported by expectations the Organization of the Petroleum Exporting Countries (OPEC) would start withholding supply soon, fearing a renewed rout such as in 2014 when prices crashed under the weight of oversupply.

OPEC’s de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5 percent of global supply, sources told Reuters this week.

However, Morgan Stanley warned a cut by the Middle East dominated producer cartel may not have the desired effect.

“The main oil price benchmarks – Brent and WTI – are both light-sweet crudes and reflect this glut,” the U.S. bank said.

“OPEC production cuts are usually implemented by removing medium and heavier barrels from the market but that does not address the oversupply of light-sweet.”

Due to the structural oversupply that has emerged in the market from record production by many countries, Morgan Stanley said that “OPEC cuts are inherently temporary (because) all they can do is shift production from one period to another”.

While OPEC considers withholding supply, U.S. crude oil production reached another record last week, at 11.7 million bpd, according to U.S. Energy Information Administration (EIA) data published on Thursday.

U.S. output has surged by almost a quarter since the start of the year.

The record output meant U.S. crude oil stocks posted the biggest weekly build in nearly two years.

Crude inventories soared 10.3 million barrels in the week to Nov. 9 to 442.1 million barrels, the highest level since early December 2017.

This surge contributed to oil prices falling by around a quarter since early October, taking many by surprise.

“Oil bulls, us included, have capitulated and we no longer see oil climbing to $95 per barrel next year,” Bank of America Merrill Lynch said in a note.

While sentiment has turned bearish, some analysts warn that 2019 could be tighter than expected.

“We expect 2019 oil demand to reach 101.1 million bpd,” natural resources research and investment firm Goehring & Rozencwajg said, up from just under 100 million bpd this year.

At the same time, the firm said production outside North America was set to disappoint.

Add OPEC’s expected supply cuts, and Goehring & Rozencwajg said “those investors who are able to adopt a contrarian stance … and stomach the volatility … are being presented with an excellent investment opportunity” to buy into oil after the recent slump.

Bank of America agreed, saying “we believe oil is oversold and will likely bounce up from the current levels, as OPEC+ dials back production in December”.

Oil falls more than 1% after Trump urges OPEC not to cut supply

CNBC

  • Oil prices fell more than 1 percent on Tuesday, with benchmark Brent crude slipping below $70 per barrel and U.S. crude under $60.
  • The move comes after U.S. President Donald Trump put pressure on OPEC not to cut supply to prop up the market.
  • The U.S.-dollar hovered near 16-month highs on Tuesday, making oil more expensive for importers using other currencies.

Oil prices fell more than 1 percent on Tuesday, with benchmark Brent crude slipping below $70 per barrel and U.S. crude under $60, after U.S. President Donald Trump put pressure on OPEC not to cut supply to prop up the market.

The U.S.-dollar hovered near 16-month highs on Tuesday, making oil more expensive for importers using other currencies.

Brent crude oil futures was down $1.03 at $69.09 per barrel by 0900 GMT. West Texas Intermediate (WTI) crude oil futures was $1.00 lower at $58.93. Both benchmarks are down 20 percent since peaking at four-year highs in early October.

“Sky-high production in the U.S., coupled with incremental barrels coming from Saudi Arabia and Russia, is starting to impact oil market balances,” Bank of America/Merrill Lynch analysts said in a note to clients, adding: “Crude oil inventories are starting to increase once again.”

Trump has made it clear he wants oil prices to fall.

“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” the president said in a Twitter post on Monday.

That led to a sharp price drop on Monday and the sell-off continued into Tuesday.

“This tweet certainly did not help prices,” ING commodities strategist Warren Patterson said.

Extraction from American shale fields over the last decade has propelled U.S. oil production to record highs this year with crude output now at 11.6 million barrels per day (bpd), helping make the United States self-sufficient in energy.

Merrill Lynch says U.S. crude production will break through 12 million bpd in 2019, supporting oil exports to the rest of the world.

Oil production is not just rising in the United States. Kazakhstan said on Tuesday its oil output rose 4.8 percent to 74.5 million tonnes in the first 10 months of 2018, equivalent to 1.82 million bpd.

Top crude exporter Saudi Arabia has watched with alarm how supply has started to outpace consumption, fearing a repeat of a glut that brought a price crash in 2014.

Saudi Energy Minister Khalid al-Falih said on Monday the Organization of the Petroleum Exporting Countries agreed there was a need to cut oil supply next year by around 1 million bpd from October levels to prevent oversupply.

Dutch bank ING said an abundance of global supply as well as the threat of economic slowdown meant “cuts over 2019 are unavoidable.”

“It is becoming clearer that as we move closer towards 2019, the market will see a sizeable surplus at least over the first half of 2019,” ING said.