Oil dips on expectations of rising output, China factory and services stutter

CNBC

Reuters

KEY POINTS
  • Brent crude futures were at $71.75 per barrel at 0131 GMT, down 29 cents, or 0.4 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $63.35 per barrel, down 15 cents, or 0.2 percent from their previous settlement.
Reusable CNBC: Oil derrick pump jack Midland Texas west Texas 150825-001
Justin Solomon | CNBC

Oil prices dipped on Tuesday on expectations rising output from the United States and producer club OPEC would offset most of the shortfall expected from U.S. sanctions on Iran, but analysts said markets remained tight.

A stutter in China’s factory and servicing industries in April also weighed on crude prices, traders said, as it suggested Asia’s biggest economy is still struggling to regain traction.

Brent crude futures were at $71.75 per barrel at 0131 GMT, down 29 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $63.35 per barrel, down 15 cents, or 0.2 percent from their previous settlement.

Oil prices surged by around 40 percent between January and April, lifted by supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.

But prices came under downward pressure late last week after U.S. President Donald Trump openly pressured OPEC and its de-facto leader Saudi Arabia to raise output to meet the supply shortfall caused by the tightening Iran sanctions.

Stephen Innes, head of trading at SPI Asset Management, said the producer group “will want to avoid at all cost oil prices surging to levels that will trigger demand devastation, (while) it is clearly in OPEC’s best interest to maintain a solid floor on prices.”

Bank of America Merrill Lynch said “Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as U.S. sanctions kick in and waivers eventually expire.”

Despite this, the bank said it expected “a nearly balanced market in 2019” as output from OPEC and also the United States will rise.

French bank BNP Paribas said it expected oil prices “to rise in the near-term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil demand”.

The bank said it expected crude markets to climb until the third quarter of 2019, adding that prices would then “start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and terminal capacity expansion.”

U.S. exports exceeded 3 million barrels per day (bpd) for the first time in early 2019 amid a more than 2 million bpd production surge over the past year, to a record of more than 12 million bpd.

BNP Paribas said it saw WTI averaging $63 per barrel in 2019, up $2 from its previous forecast, while Brent will average $71 per barrel, up $3 from an earlier estimate.

“In 2020, we see WTI averaging $64 per barrel and Brent $68 per barrel,” the bank said.

Oil falls after Trump says he pressed OPEC to make up for Iranian sanctions

CNBC

Reuters

KEY POINTS
  • Oil prices continue to fall after Friday’s sharp pullback.
  • President Donald Trump on Friday said he called OPEC and told the producer group to pump more oil to offset U.S. sanctions on Iran.
  • Oil markets are already tight as OPEC and allies cut supplies and U.S. sanctions curb Iranian and Venezuelan exports.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
Getty Images

Oil prices fell on Monday, extending a slump from Friday that ended weeks of rallying, after President Donald Trump claimed that he demanded OPEC raise output to soften the impact of U.S. sanctions against Iran.

Brent crude futures were down 14 cents at $72.01 a barrel around 8:35 a.m. ET (1235 GMT). U.S. West Texas Intermediate crude futures lost 14 cents to $63.16.

Both benchmarks fell around 3% in the previous session, after Trump said he told OPEC to lower oil prices.

“Gasoline prices are coming down. I called up OPEC, I said you’ve got to bring them down. You’ve got to bring them down,” Trump told reporters on Friday.

“Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement,” the president later tweeted.

The national average U.S. gasoline price is actually still rising, and sources denied that several high-level OPEC and Saudi officials spoke to Trump.

Trump’s remarks triggered a selloff, putting at least a temporary ceiling on a 40 percent price rally in oil prices since the start of the year.

The rally had gained momentum in April after Trump tightened sanctions against Iran by ending all exemptions that major buyers, especially in Asia, previously had.

U.S. sanctions on Venezuela are also working to tighten global supply as fighting in Libya threatens to curb output there as well.

“We are dealing with a market that’s not actually short of supply but is short due to politically-motivated action, and we know how quickly that can be turned around if necessary,” Saxo Bank analyst Ole Hansen told Reuters.

“Being a bear in the market is a very lonely place now.”

Traders said the market was shifting its focus to the voluntary supply cuts led by OPEC, de facto headed by the world’s top exporter Saudi Arabia.

“We are of the view that Saudi Arabia will increase output as soon as May, something they were likely to do anyway in the lead up to summer,” ING bank said. “The Kingdom could increase output by 500 million barrels per day (bpd) and still be in compliance with the OPEC+ deal for the month of May.”

The cuts have been supported by some non-OPEC producers, notably Russia, but analysts said this cooperation may not last beyond a meeting between OPEC and its other allies, a group known as OPEC+, scheduled for June.

Russia has said it would be able to meet China’s oil demand needs as Beijing tries to replace the imports it usually gets from Iran.

“Russia appears to have every reason to resume ramping up production levels and the base case should start to become (that) we will not see OPEC+ agree upon extending production cuts, with tweaks to cover the shortfall from Iran,” said Edward Moya, senior analyst at futures brokerage OANDA.

— CNBC’s Tom DiChristopher contributed to this report.

Oil dips on hope OPEC will raise output, but market remains tense

CNBC

Reuters

KEY POINTS
  • Brent crude futures were at $74.16 per barrel at 0223 GMT, down 19 cents, or 0.3 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $64.83 per barrel, down 38 cents, or 0.6 percent, from their previous settlement.
Reusable: Petrobras oil platform Rio De Janeiro 150703
A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
Getty Images

Oil prices dipped on Friday on hopes that producer club OPEC will soon raise output to make up for a decline in exports from Iran following a tightening of sanctions on Tehran by the United States.

Despite this, oil markets remain tight amid supply disruptions and rising geopolitical concerns especially over the tensions between the United States and Iran, analysts said.

Brent crude futures were at $74.16 per barrel at 0223 GMT, down 19 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $64.83 per barrel, down 38 cents, or 0.6 percent, from their previous settlement.

The dip followed Brent’s rise above $75 per barrel for the first time this year on Thursday after GermanyPoland and Slovakia suspended imports of Russianoil via a major pipeline, citing poor quality. The move cut parts of Europe off from a major supply route.

But prices were already gaining before the Russian disruption, driven up by supply cuts led by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) and U.S. sanctions on Venezuela and Iran. Crude futures are up around 40 percent so far this year.

Washington said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action.

To make up for the shortfall from Iran, the United States is pressuring OPEC’s de-facto leader Saudi Arabia to end its voluntary supply restraint.

“The U.S. will continue to pressure Saudi Arabia to lift its production to cover the supply gap,” said Alfonso Esparza, senior market analyst at futures brokerage OANDA.

Jefferies bank said “a drop to 500,000 to 600,000 barrels per day (bpd) now seems realistic” for Iranian oil exports, adding that “at least China and potentially India and Turkey will continue to import Iranian crude. ”

“OPEC will make up for the shortfall,” the U.S. investment bank said.

Despite U.S. efforts to drive Iranian oil exports down to zero, many analysts expect some oil to still seep out of the country.

“A total of 400,000 to 500,000 barrels per day of crude and condensate will continue to be exported,” said energy consultancy FGE, down from around 1 million bpd currently.

Most of this oil would be smuggled out of Iran or go to China despite the sanctions.

China, the world’s biggest buyer of Iranian oil, this week formally complained to the United States over its unilateral Iran sanctions.

Although most analysts expect some Iranian oil to keep flowing, they expect markets to remain tight amid little spare capacity and the high geopolitical tension.

“The oil market remains tight … (and) oil prices will rise,” FGE chairman Fereidun Fesharaki said on Friday in a note, adding that ”$80 to $100 per barrel oil is around the corner.”

Oil dips on soaring US supply, but Iran sanctions still support crude

CNBC

Reuters

KEY POINTS
  • Brent crude futures were at $74.53 per barrel at 0241 GMT, down 4 cents from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $65.75 per barrel, down 14 cents, or 0.2 percent, from their previous settlement.
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Rusted out “pump-jacks” in the oil town of Luling, Texas.
Getty Images

Oil prices dipped on Thursday as record U.S. output and rising crude stockpiles dampened the impact on markets of tighter U.S. sanctions on Iran and producer club OPEC’s continued curbs on supply.

Brent crude futures were at $74.53 per barrel at 0241 GMT, down 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $65.75 per barrel, down 14 cents, or 0.2 percent, from their previous settlement.

Crude futures rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

“Following the U.S. decision to toughen its sanctions on Iran … we have revised up our end-year forecast for Brent crude from $50 to $60 per barrel,” analysts at Capital Economics said in a note.

U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue since President Donald Trump first announced the move last May, a U.S. official said on Thursday during a media call.

“Before sanctions…Iran generated as much as $50 billion annually in oil revenue. We estimate that our sanctions have already denied the regime more than $10 billion since May (2018),” said Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.

The U.S. decision try and bring down Iran oil exports to zero comes amid supply cuts led by producer Organization of the Petroleum Exporting Countries (OPEC) since the start of the year aimed at propping up prices.

As a result, Brent crude oil prices have risen by almost 40 percent since January.

Despite this, Capital Economics said “we still expect oil prices to fall this year as sluggish global growth weighs on oil demand, U.S. shale output grows strongly and investor aversion to risk assets like commodities increases.”

In Asia, South Korea’s economy unexpectedly shrank in the first quarter, the Bank of Korea said on Thursday, marking its worst performance since the global financial crisis.

On the supply side, U.S. crude oil production has risen by more than 2 million barrels per day (bpd) since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

In part because of soaring domestic production, U.S. commercial crude oil inventories last week hit a October 2017 high of 460.63 million barrels, the Energy Information Administration said on Wednesday. That was a rise of 1.3 million barrels.

Oil eases as supplies adequate for now, despite Iran sanctions

CNBC

Reuters

KEY POINTS
  • Brent crude futures were at $74.13 per barrel at 0456 GMT, down 38 cents, or 0.5 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $65.93 per barrel, down 37 cents, or 0.6 percent, from their previous settlement.
RT: india oil tankers man crossing rail cars Kolkata
A worker walks atop a tanker wagon to check the freight level at an oil terminal on the outskirts of Kolkata.
Rupak De Chowdhuri | Reuters

Oil prices fell on Wednesday amid signs that global markets remain adequately supplied despite a jump to 2019 highs this week on Washington’s push for tighter sanctions against Iran.

Brent crude futures were at $74.13 per barrel at 0456 GMT, down 38 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $65.93 per barrel, down 37 cents, or 0.6 percent, from their previous settlement.

Crude oil prices for spot delivery rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

The spot price surge has put the Brent forward curve into steep backwardation, in which prices for later delivery are cheaper than for prompt dispatch.

Stephen Schork of the Schork Report energy newsletter, said the shift to backwardation in the past four months was “a sign that the market’s underlying fundamentals have shifted away from a spot market that is well supplied to a market where demand is beginning to overtake supply.”

U.S. sanctions against oil exporter Iran were introduced in November 2018, but Washington allowed its largest buyers limited imports of crude for another half-year as an adjustment period.

With Iranian oil exports likely declining sharply from May as most countries bow to U.S. pressure, global crude markets are expected to tighten in the short-run, Goldman Sachs and Barclays bank said this week.

Despite the tight spot market, analysts said global oil markets remained adequately supplied thanks to ample spare capacity from the Middle Eastdominated Organization of the Petroleum Exporting Countries (OPEC), Russiaand also the United States.

The International Energy Agency (IEA), a watchdog for oil consuming countries, said in a statement on Tuesday that markets are “adequately supplied” and that “global spare production capacity remains at comfortable levels.”

The biggest source of new oil supply comes from the United States, where crude oil production has already risen by more than 2 million barrels per day (bpd) since early 2018 to a record of more than 12 million bpd early this year, making America the world’s biggest oil producer ahead of Russia and Saudi Arabia.

“Total oil supplies from the United States are expected to grow by 1.6 million bpd this year,” the IEA said.

Commercial inventories in the United States are also high.

U.S. crude oil inventories rose by 6.9 million barrels in the week to April 19 to 459.6 million, data from industry group the American Petroleum Institute showed on Tuesday.