Oil prices resume drop, shed most of last session’s gains

CNBC

  • Concerns over oversupply and the outlook for demand continue to weigh on oil prices.
  • U.S. crude inventories fell by 497,000 barrels in the week to Dec. 14, according to the U.S. Energy Information Administration, smaller than the decrease of 2.4 million barrels analysts had expected.
  • The decline in U.S. crude inventories was the third consecutive decrease.

Oil prices fell on Thursday to erase most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy.

The front-month U.S. crude contract had dropped more than $1, or 2.24 percent, to $47.10 per barrel by 0423 GMT, offseting gains of 96 cents chalked up on Wednesday.

International benchmark Brent crude futures were down over $1, or 1.82 percent, at $56.20 per barrel, after climbing almost 2 percent the session before.

“Wednesday’s recovery was short-covering. Investors quickly moved their attention to deteriorating fundamentals in the oil markets including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production,” said Xi Jiarui, chief oil analyst at consultancy JLC.

The Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed this month to curb output by 1.2 million barrels per day (bpd) in an attempt to drain tanks and boost prices.

Oil prices are down more than 30 percent from peaks seen in October.

But the cuts will not happen until next month and production has been at or near record highs in the United States, Russia and Saudi Arabia.

Saudi Arabia’s energy minister, Khalid al-Falih, said he expected global oil stocks to fall by the end of the first quarter, but added that the market remained vulnerable to political and economic factors as well as speculation.

Technical analysis showed U.S. oil may retest support at $45.94 per barrel, a break below which could cause a loss to $44.43, Reuters market analyst Wang Tao wrote on Thursday.

Squaring up

Volatility in crude prices this week has driven investors to shut their positions and is draining liquidity from the market, Xi said.

Total market open interest in U.S. crude contracts had fallen to 2.063 million contracts as of Thursday, up from a record of 2.71 million in May.

“It has been a tumultuous week in oil markets and traders may opt to shut it down after the last big risk event of the year with year-end position-squaring likely to kick-in today,” said Stephen Innes, head of trading for Asia-Pacific at OANDA.

Innes was referring to the U.S. Federal Reserve’s last policy meeting of 2018, at which it suggested the U.S. economy no longer needed the central bank’s support either through lower-than-normal interest rates or by maintaining a massive balance sheet.

But U.S. inventory data offered some support to WTI prices.

U.S. crude inventories fell by 497,000 barrels in the week to Dec. 14, the U.S. Energy Information Administration said on Wednesday, smaller than the decrease of 2.4 million barrels analysts had expected. The decline was the third consecutive decrease.

Distillate stockpiles, which include diesel and heating oil, fell by 4.2 million barrels, versus expectations of a 573,000-barrel increase, the EIA said.

Distillate demand rose to the highest since January 2003, which bolstered buying, particularly in heating oil futures, the market’s proxy for diesel.

Oil prices rebound on hints of stabilization in markets

CNBC

  • U.S. crude oil had climbed 37 cents, or 0.8 percent, to $46.24 per barrel by 0122 GMT, after plunging 7.3 percent the day before in a session when it touched its lowest since August last year at $45.79.
  • Global benchmark Brent was up 0.85 percent, or 49 cents, at $56.75 per barrel. It dropped 5.62 percent on Tuesday, at one point marking a 14-month low of $56.16 a barrel.

Oil prices rebounded on Wednesday after falling for the past three sessions with worries about oversupply and a slowing global economy keeping markets under pressure though sentiment may be shifting as falling equity markets seemed to stabilize.

West Texas Intermediate futures (WTI) climbed 4 cents cents, or 0.09 percent, to $46.28 per barrel by 0443 GMT, after plunging 7.3 percent the day before in a session when it touched its lowest since August 2017.

Global benchmark Brent crude futures rose 0.4 percent, or 23 cents, at $56.49 per barrel. It dropped 5.6 percent on Tuesday, at one point hitting a 14-month low.

WTI prices are holding as “traders look for some solace in U.S. equity markets as risk sentiment appears to be stabilising,” said Stephen Innes, head of trading for Asia-Pacific at OANDA.

“But we are far removed from any bullish flip in investor sentiment.”

The S&P 500 ended up slightly on Tuesday and the Dow Jones Industrial Average rose 0.35 percent as both indices ended losing streaks.

Further adding to the oversupply concerns, the American Petroleum Institute said on Tuesday U.S. crude stocks rose unexpectedly last week, while gasoline inventories increased.

If the build in crude stockpiles is confirmed by U.S. government data Wednesday, it will be the first increase in three weeks.

Meanwhile, analysts said that upcoming output cuts led by the Organization of the Petroleum Exporting Countries (OPEC) had so far failed to stimulate the market as they were not due to kick in until next month.

Output from de facto OPEC leader Saudi Arabia as well as the United States and Russia — leading producers outside the group — has been at or near record highs.

The U.S. government said shale production is expected to climb to over 8 million barrels per day (bpd) for the first time by the end of December.

Russian oil output is so far this month at a record 11.42 million bpd, an industry source told Reuters.

However, there were some factors tightening supply, with Libya’s state oil company declaring force majeure at the country’s largest oilfield.

That came a week after the firm announced a contractual waiver on exports from the field following its seizure by protesters.

Elsewhere, a speech marking 40 years of market liberalization by Chinese President Xi Jinping offered no specific support measures for the second-largest economy, disappointing investors who were expecting fiscal policy loosening and a tax cut.

China’s Shanghai crude futures fell 5.8 percent to trade at 389.4 yuan ($56.53)per barrel on Wednesday, the lowest since their launch in March.

Oil market investors were also turning their attention to the outcome of a two-day meeting of the U.S. Federal Reserve that is due to end on Wednesday.

The Fed is expected to raise U.S. interest rates for the fourth time this year though the central bank may temper the outlook for further increases in 2019 due to concerns about the economy.

Oil prices fall for third straight session amid supply glut worries

CNBC

  • Both Brent and U.S. crude futures slipped more than 1 percent.
  • Both U.S. crude and Brent have shed more than 30 percent from early October amid swelling global inventories, with WTI currently trading at levels not seen since October 2017.

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 dropped over 1 percent on Tuesday, falling for a third straight session, as reports of inventory builds and forecasts of record shale output in the United States, currently the world’s biggest producer, stoked worries about oversupply.

Concerns around future oil demand amid weakening global economic growth and doubts over the impact of planned production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) were also pressuring prices, traders said.

International benchmark Brent crude oil futures were at $58.90 per barrel at 0340 GMT, down 71 cents, or 1.2 percent, from their last close. Brent has fallen more than 4 percent in the past three sessions so far.

U.S. West Texas Intermediate (WTI) crude futures were down 60 cents, or 1.2 percent, at $49.27 per barrel.

Both U.S. crude and Brent have shed more than 30 percent from early October amid swelling global inventories, with WTI currently trading at levels not seen since October 2017.

“OPEC is reducing production to attempt to rebalance. However, data from Cushing still shows an oversupply,” said Hue Frame, portfolio manager at Frame Funds.

“This isn’t being viewed favourably by the market, especially in combination with slow global growth.”

Inventories at the U.S. storage hub of Cushing, Oklahoma, which is the delivery point for the WTI futures contract, rose by more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday.

Meanwhile, oil production from seven major U.S. shale basins is expected to climb to 8.03 million barrels per day (bpd) by the end of the year for the first time, the U.S. Energy Information Administration said on Monday.

“Rising U.S. shale production levels along with a deceleration in global economic growth has threatened to offset OPEC+ efforts as markets weigh the potential of looser fundamentals,” said Benjamin Lu Jiaxuan, an analyst at Singapore-based brokerage firm Phillip Futures.

With oil prices now falling, unprofitable shale producers will eventually stop operating and cut supply, but that will take some time, analysts said.

Supply curbs agreed by OPEC and its Russia-led allies might not bring about the desired results as U.S. output goes on increasing and as Iran keeps pumping out more oil, analysts said.

The cuts are also coming from currently high production. Oil output from Russia has been at a record-high of 11.42 million barrels per day (bpd) so far in December.

“The strength of OPEC+ cuts will be weighed against Iranian production levels in lieu of U.S. waivers till Q2 2019,” analyst Lu Jiaxuan said.

“Market confidence remains extremely delicate amidst looming economic uncertainties as investors contemplate on weaker fuel demand beyond 2018.”

China’s industrial output in November rose the least in nearly three years as the world’s second-largest economy lost further momentum.

Brent crude dips on global economy worries, US oil prices steady

CNBC

  • U.S. drillers cut four oil rigs in the week to Dec. 14, pulling the total count to the lowest since mid-October at 873, according to energy services firm Baker Hughes.
  • The U.S. Federal Open Market Committee is set to start a two-day meeting on Tuesday.

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.

Brent crude prices slipped on Monday amid concerns over demand in the wake of weaker growth in major economies, while U.S. oil markets held steady after U.S. drilling activity fell to its lowest level in about two months.

International Brent crude oil futures were at $60.16 per barrel at 0248 GMT, down 12 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.33 per barrel, up 13 cents, or 0.3 percent.

Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, while the country’s industrial output rose the least in nearly three years as the economy continued to lose momentum.

French business activity plunged unexpectedly into contraction this month, retreating at the fastest pace in over four years, while Germany’s private sector expansion slowed to a four-year low in December.

But oil prices were supported after General Electric Co’s Baker Hughes energy services firm said on Friday that U.S. drillers cut four oil rigs in the week to Dec. 14, pulling the total count to the lowest since mid-October at 873.

“This, when combined with (expectations) Saudi Arabia is … to cut exports to the United States to draw down inventory builds (there) should provide a short-term base despite global slowdown fears, which continue to resonate,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

However, the current U.S. rig count, which serves as an early indicator of future output, is higher than a year ago when 747 rigs were active.

The Organisation of the Petroleum Exporting Countries and its Russia-led allies have agreed to curb output from January, in a move to be reviewed at a meeting in April. Saudi Arabia is OPEC’s de facto leader.

“The potential for a significant movement in the U.S. dollar clearly has an impact on oil pricing with the Fed meeting (this week). We’re looking outside the oil markets for its next major move,” said Michael McCarthy, chief markets strategist at CMC markets.

The U.S. Federal Open Market Committee (FOMC) is set to start a two-day meeting on Tuesday.

Oil prices rise as China-US trade tensions show signs of easing

CNBC

  • Oil prices edged up on Thursday, buoyed by a draw down in inventories in the U.S. and by signs of easing trade tensions between Washington and Beijing.
  • Oil prices have also been supported by OPEC-led supply curbs announced last week, although gains have been muted after the producer group lowered its 2019 demand forecast.

Oil prices rose on Thursday, buoyed by a draw down in U.S. crude stockpiles and indications that China is taking concrete steps to put a trade war truce with Washington into action.

Crude oil prices have also been supported by OPEC-led supply curbs announced last week, although gains were capped after the producer group lowered its 2019 demand forecast.

International Brent crude oil futures were at $60.47 per barrel at 0442 GMT, up 32 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.35 per barrel, up 20 cents or, 0.4 percent.

In a sign that China is willing to lessen the trade tensions with United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday, helping investors breathe a sigh of relief across broader stock markets, and pushing oil prices up.

A drop in U.S. crude stocks also boosted oil, which has been riding higher on expectations that the OPEC-led planned output cuts would re-balance the market in 2019, analysts said.

U.S. crude inventories fell by 1.2 million barrels in the week to Dec. 7, compared with expectations for a decrease of 3 million barrels.

“The agreement of a reduction in output of 1.2 million barrels per day at last week’s OPEC meeting should see the market push into (supply) deficit in H1 2019,” ANZ analyst Daniel Hynes said.

“Rising U.S. output, weaker economic growth and the production cut agreement roll-off will see a balanced market in H2,” Hynes said. ANZ expects Brent to reach $75 a barrel in the first quarter of 2019.

The Organisation of the Petroleum Exporting Countries (OPEC) said demand for its crude in 2019 would fall to 31.44 million barrels per day (bpd), 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.

This adds to the concerns of several market watchers that the decision led by the group to cut production might not be enough to override a glut or push prices higher.

Oil market participants are concerned about the likelihood of weaker macroeconomic growth, which could rein in any expansion in oil demand, analysts said.

“If we do see a reduction in global growth risk, then we are monitoring increases in demand in combination with supply being absorbed,” said Hue Frame, portfolio manager at Frame Funds in Sydney.

“There are so many moving parts at the moment that it is difficult to provide a convincing forecast,” Frame said.

He added, however, that there is a significant upside to prices going forward.