Brent oil rises for second day after Middle East tanker attacks

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Reuters

KEY POINTS
  • Tanker attacks raise threat to supplies from Middle East
  • Brent, WTI still heading for weekly declines
  • OPEC cuts forecast for growth in global oil demand

Brent crude on Friday extended sharp gains from the previous day following attacks on two oil tankers in the Gulf of Oman that stoked concerns of reduced crude flows of the commodity through one of the world’s key shipping routes.

The attacks near Iran and the Strait of Hormuz pushed oil prices up as much as 4.5% on Thursday, putting the brakes on a slide in prices in recent weeks over concerns about global demand.

RT: An oil tanker is seen after it was attacked at the Gulf of Oman, June 13, 2019.
An oil tanker is seen after it was attacked at the Gulf of Oman, June 13, 2019.
ISNA | Reuters

It was the second time in a month tankers have been attacked in the world’s most important zone for oil supplies, amid rising tensions between the United States and Iran. Washington quickly blamed Iran for Thursday’s attacks, but Tehran denied the allegation.

Brent crude futures were up 23 cents, or 0.4%, at $61.54 a barrel by 0638 GMT, having settled up 2.2% on Thursday. Still, the contract is heading for a weekly fall of nearly 3%, a fourth week of decline.

U.S. West Texas Intermediate crude futures were down 1 cent at $52.27 a barrel, after earlier rising. WTI also closed up 2.2% in the previous session, but is on course for a weekly decline of 3.2%.

“The events in the Gulf would now appear to have taken on an overt military dimension and we are waiting to see what action the U.S. Fifth Fleet and other military resources in the region may take,” said Tom O’Sullivan, founder of energy and security consultancy Mathyos Advisory.

Tensions in the Middle East have escalated since U.S. President Donald Trump withdrew from a 2015 multinational nuclear pact with Iran and reimposed sanctions, especially targeting Tehran’s oil exports.

Iran, which has distanced itself from the previous attacks, has said it would not be cowed by what it called psychological warfare.

U.S. Secretary of State Mike Pompeo said the United States has assessed Iran was behind the attacks on Thursday.

The U.S. military later released a video that it said showed Iran’s Revolutionary Guard removing an unexploded mine from the side of a Japanese-owned oil tanker.

In a statement on Thursday evening, the Iranian mission to the United Nations said Tehran “categorically rejects the U.S. unfounded claim with regard to 13 June oil tanker incidents and condemns it in the strongest possible terms”.

Qatar called for an international investigation into the attacks and a de-escalation of tensions in the region.

On the demand side, OPEC on Thursday cut its forecast for growth in global oil demand due to trade disputes and pointed to the risk of a further reduction, building a case for prolonged supply restraint in the rest of 2019.

The producer group and its allies are due to meet in the coming weeks to decide whether to maintain supply curbs. Some members are worried about a steep slide in prices, despite demands from U.S. President Donald Trump for action to lower the cost of oil.

World oil demand will rise by 1.14 million barrels per day (bpd) this year, 70,000 bpd less than previously expected, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report published on Thursday.

“Throughout the first half of this year, ongoing global trade tensions have escalated,” OPEC said in the report. “Significant downside risks from escalating trade disputes spilling over to global demand growth remain.”

Oil extends decline after slump on high inventories, demand outlook

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Reuters

KEY POINTS
  • Brent crude futures were down 6 cents, or 0.1%, at $59.91 a barrel by 0336 GMT after earlier rising slightly. Prices fell 3.7% on Wednesday to settle at $59.97, the international benchmark’s lowest close since Jan. 28.
  • U.S. West Texas Intermediate crude futures were down 8 cents, or 0.2%, at $51.06 a barrel. They fell 4% in the previous session to $51.14, the lowest close since Jan. 14.
Reusable: Oil pump jack in North Dakota 150128
An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices fell for a second day on Thursday, extending declines of as much as 4% in the previous session, on continued increases in U.S. crude stockpiles and concerns about lower demand growth.

Brent crude futures were down 6 cents, or 0.1%, at $59.91 a barrel by 0336 GMT after earlier rising slightly. Prices fell 3.7% on Wednesday to settle at $59.97, the international benchmark’s lowest close since Jan. 28.

U.S. West Texas Intermediate crude futures were down 8 cents, or 0.2%, at $51.06 a barrel. They fell 4% in the previous session to $51.14, the lowest close since Jan. 14.

“It was a brutal move, sheer panic,” said Stephen Innes, managing partner at Vanguard Markets.

The U.S. Energy Information Administration (EIA) on Wednesday reported crude stockpiles rose unexpectedly for a second week in a row, climbing 2.2 million barrels last week after analysts had forecast a decrease of 481,000 barrels.

At 485.5 million barrels, U.S. commercial stocks were at their highest since July 2017 and about 8% above the five-year average for this time of year, it said.

On Tuesday, the EIA cut its forecasts for 2019 world oil demand growth.

The negative outlook is prompting hedge fund managers to exit oil positions at the fastest rate since the fourth quarter of 2018 due to increasing fears about the health of the global economy.

The escalating trade war between the United States and China, the world’s two biggest oil consumers, is causing the most concern among oil analysts, with consultants and banks cutting their demand growth forecasts

Goldman Sachs said on Wednesday an uncertain macroeconomic outlook and volatile oil production from Iran and others could cause the Organization of the Petroleum Exporting Countries (OPEC) to roll over supply cuts it has enacted with other producers.

OPEC and non-member producers including Russia have limited their oil output by 1.2 million barrels per day this year to prop up prices.

OPEC is set to meet at the end of June though a meeting of the wider producers that agreed to the cuts, known as OPEC+, may not occur until early July.

While officials from some OPEC members have said that the larger OPEC+ group will likely roll over the cuts, Algeria has proposed increasing the reductions, according to four sources familiar with the matter.

However, Goldman believes the producers will maintain the current supply levels.

“Fundamental uncertainty on the current and forward states of the global oil market is high,” Goldman said.

“We believe that this will lead the group to roll forward its current agreement, with likely no change to country level quotas given the difficulty in determining required production levels in coming months,” the bank’s analysts said.

Oil falls more than 1% on weaker oil demand growth, surprise gain in US crude stocks

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Reuters

KEY POINTS
  • Brent crude futures, the international benchmark for oil prices, were down 87 cents, or 1.4%, at $61.42 a barrel by 0231 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were down 85 cents, or 1.6%, at $52.41 per barrel.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices fell more than 1% on Wednesday, weighed down by a weaker oil demand outlook and a rise in U.S. crude inventories despite growing expectations of ongoing OPEC-led supply cuts.

Brent crude futures, the international benchmark for oil prices, were down 87 cents, or 1.4%, at $61.42 a barrel by 0231 GMT.

U.S. West Texas Intermediate (WTI) crude futures were down 85 cents, or 1.6%, at $52.41 per barrel.

The U.S. Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and U.S. crude oil production in a monthly report released on Tuesday.

The EIA lowered its 2019 world oil demand growth forecast by 160,000 barrels per day (bpd) to 1.22 million bpd and wound back its forecast for 2019 U.S. crude production to 12.32 million bpd, 140,000 bpd less than the May forecast.

A surprise increase in U.S. crude stockpiles also kept oil prices under pressure.

“Investors have been concerned about the recent rise in stockpiles in the U.S.,” ANZ bank said in a note.

U.S. crude inventories rose by 4.9 million barrels in the week ended June 7 to 482.8 million barrels, according to data from the American Petroleum Institute (API) on Tuesday. That compared with analysts’ expectations for a decrease of 481,000 barrels.

Official data from the Energy Information Administration (EIA) is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

Alongside concerns about rising supply, ongoing trade tensions between the United States and China, the world’s two biggest oil consumers, weighed on prices. U.S. President Donald Trump said on Tuesday he was holding up a trade deal with China.

“Oil prices have struggled to retain bullish gains as traders stay cautious over heightened geopolitical risks and persistent weakness in the global economic backdrop,” said Benjamin Lu, commodities analyst at Phillips Future in Singapore.

With the next meeting of the Organization of the Petroleum Exporting Countries (OPEC) set for the end of June, the market is eyeing whether the world’s major oil producers would prolong their supply cuts.

OPEC, along with non-members including Russia in a group called OPEC+, have limited their oil output by 1.2 million bpd since the start of the year to prop up prices.

The Energy Minister for the United Arab Emirates Suhail bin Mohammed al-Mazroui said on Tuesday that OPEC members were close to reaching an agreement on continuing production cuts.

OPEC is set to meet on June 25, followed by talks with its allies led by Russia on June 26. But Russia suggested a date change to July 3 to 4, sources within the group previously told Reuters.

Oil prices rise on likelihood of ongoing OPEC+ supply cuts

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $54.43 per barrel, 44 cents, or 0.8%, above their last settlement.
Reusable: Shell Oil Polar Pioneer oil rig
Shell Oil’s drilling rig Polar Pioneer in Port Angeles, Wash., on May 12, 2015.
Jason Redmond | Reuters

Oil prices rose on Monday after Saudi Arabia said producer club OPEC and Russia were likely to keep withholding supplies, and in relief that the United States and Mexico averted a trade war that would have damaged the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $54.43 per barrel, 44 cents, or 0.8%, above their last settlement.

Traders said crude prices were rising because of statements by OPEC’s de-facto leader Saudi Arabia on Friday saying that the group was close to agreeing extended supply cuts.

“With a production cut extension now sounding more likely than not, it should be incredibly supportive for oil prices,” said Stephen Innes, Managing Partner at Vanguard Markets.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-members, including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.

“Also with the Mexican stalemate averted and no harmful shockwaves from this weekend G-20 meeting, risk assets should open with a bounce in their step and oil could trade favorably as WTI and Brent will continue to track the broader risk environment high,” Innes said.

Stock markets jumped on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week averted a tariff war between the neighbors.

Oil prices extend gains, climb further from five-month lows

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Reuters

KEY POINTS
  • Brent crude futures were up 85 cents, or 1.4%, at $62.51 a barrel by 0356. They gained 1.7% on Thursday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 71 cents, or 1.4%, at $53.30 per barrel. They finished the previous session 1.8% higher.
RT: Offshore oil rig Norway 160211
An offshore oil rig off the coast of Norway.
Nerijus Adomaitis | Reuters

Oil prices rose more than 1% on Friday, climbing further away from five-month lows hit earlier in the week after a report that Washington could postpone trade tariffs on Mexico and amid signs that OPEC and other producers may extend their supply cuts.

Brent crude futures were up 85 cents, or 1.4%, at $62.51 a barrel by 0356. They gained 1.7% on Thursday.

U.S. West Texas Intermediate (WTI) crude futures were up 71 cents, or 1.4%, at $53.30 per barrel. They finished the previous session 1.8% higher.

Brent and WTI on Wednesday hit their lowest marks since mid-January at $59.45 and $50.60, respectively, after U.S. crude output reached a record high and stockpiles climbed to their highest since July 2017.

That put both contracts in bear territory, having lost more than 20% from peaks reached in late April.

But on Thursday oil prices followed U.S. equities higher after Bloomberg News reported that the United States may delay tariffs on goods from Mexico as talks continue.

“After prices hit the depth of the sewer this week, and (were) arguably in oversold territory, traders were always going to be predisposed to book profits ahead of the weekend,” Stephen Innes, managing partner at Vanguard Markets said in a note.

Despite the two-day bounce, Brent is heading for a third week of decline, down more than 3%. So too is WTI, which is on track for a decline of about 0.4%.

Sentiment for oil remains dim as fresh signs emerge of a stalling global economy, with the trade war between the U.S. and China intensifying.

Prices had been supported by supply curbs by the Organization of the Petroleum Exporting Countries (OPEC) and producing allies, including Russia.

Supply has also been limited by U.S. sanctions on oil exports from Iran and Venezuela.

President Vladimir Putin said on Thursday that Russia had differences with OPEC over what constituted a fair price for oil, but that Moscow would take a joint decision on output at a policy meeting in coming weeks.

Also potentially keeping a lid on prices is the unrelenting rise in U.S. crude production.

U.S. oil output rose to a record 12.4 million barrels per day (bpd) in the week to May 31, the Energy Information Administration said on Wednesday, an increase of 1.63 million bpd since May 2018.

U.S. crude oil inventories also surged by 6.8 million barrels over the same week, to 483.26 million barrels, their highest levels since July 2017.

Research firm Rystad Energy has raised its forecast for U.S. crude output by 200,000 barrels bpd, to 13.4 million bpd by the December 2019, it said in a statement on its website.