Oil inches up amid Middle East tensions

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Reuters
KEY POINTS
  • Brent crude futures rose 4 cents to $63.30 a barrel by 0335 GMT.
  • The international benchmark rose more than 1% in the previous session, following Iran’s seizure of a British tanker last week that stoked fears of supply disruptions from the energy-rich Gulf.
  • West Texas Intermediate (WTI) crude futures were unchanged at $56.22 per barrel.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices edged higher on Tuesday amid lingering concerns about possible supply disruptions in the Middle East, but an overall weaker demand outlook kept a lid on gains, helped by a vow by the International Energy Agency (IEA) to take swift action to keep global oil markets adequately supplied.

Brent crude futures rose 4 cents to $63.30 a barrel by 0335 GMT. The international benchmark rose more than 1% in the previous session, following Iran’s seizure of a British tanker last week that stoked fears of supply disruptions from the energy-rich Gulf.

West Texas Intermediate (WTI) crude futures were unchanged at $56.22 per barrel.

“Downward revisions on global oil demand, along with rising challenges in the macroeconomic environment, have capped bullish gains for oil prices,” said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based Phillip Futures.

Meanwhile, the IEA said it was closely monitoring developments in the Strait of Hormuz as relations between Iran and Britain remain tense.

“The IEA is ready to act quickly and decisively in the event of a disruption to ensure that global markets remain adequately supplied,” it said, adding that executive director Fatih Birol has been in talks with IEA members, associate governments and other nations.

“Consumers can be reassured that the oil market is currently well supplied, with oil production exceeding demand in the first half of 2019, pushing up global stocks by 900,000 barrels per day,” the IEA said in a statement.

The potential for disruption in the Middle East has come amid a more fundamental souring of market sentiment in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand.

“Lower global demand estimates…have hit crude prices in the last couple of weeks,” said Alfonso Esparza, senior market analyst at OANDA.

“Weather and geopolitical disruptions have been temporary and only the OPEC+ deal has given traders clarity with the group’s commitment to reducing the oil glut at their expense.”

The ‘OPEC+’ deal refers to coordinated efforts by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, including Russia, to withhold supplies since the start of the year to prop up prices.

Oil gains as Middle East Gulf tensions flare, Libya oil field shut

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Reuters
KEY POINTS
  • Brent crude futures climbed 85 cents, or 1.4%, at $63.32 a barrel by 0404 GMT. The international benchmark rose by $1 earlier.
  • West Texas Intermediate (WTI) crude futures were up 47 cents, or 0.8%, at $56.10 a barrel.
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An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner
Getty Images

Oil prices rose on Monday on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Middle East and after Libyareported the shut down of its largest oil field.

Brent crude futures climbed 85 cents, or 1.4%, at $63.32 a barrel by 0404 GMT. The international benchmark rose by $1 earlier.

West Texas Intermediate (WTI) crude futures were up 47 cents, or 0.8%, at $56.10 a barrel.

WTI fell over 7% and Brent fell more than 6% last week.

“Falling global demand and rising U.S. stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf,” Edward Moya, senior market analyst at OANDA in New York, said in a note.

Iran’s Revolutionary Guards said on Friday they had captured a British-flagged oil tanker in the Gulf in response to Britain’s seizure of an Iranian tanker earlier this month.

The move has increased the fear of potential supply disruptions in the Strait of Hormuz at the mouth of Gulf, through which flows about one-fifth of the world’s oil supplies.

Britain was weighing its next moves on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized the ship.

A senior United States administration official said on Friday the U.S. will destroy any Iranian drones that fly too close to its ships.

A day earlier, the U.S. said one of its navy ships had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

Crude oil supply outages and curbs also helped lift prices higher.

“Oil prices got a small boost this morning after Libya’s (NOC) declared force majeure on Sharara crude loaded at Zawiya port,” said Stephen Innes, managing partner at Vanguard Markets.

Libya’s National Oil Corporation (NOC) declared a force majeure on Saturday at the country’s largest oilfield, El Sharara, after it was shut down the previous day causing a production loss of about 290,000 barrels per day (bpd).

Meanwhile, data late last week showed shipments of crude oil from Saudi Arabia, the world’s top oil exporter, fell to a 1-1/2 year low in May.

U.S. energy firms reduced the number of oil rigs operating for a third week in a row as drillers follow through on plans to cut spending amid a global supply glut. The United States is now the world’s largest oil producer.

Speculative money is flowing back into the oil markets in response to the escalating dispute between Iran and the United States and other western nations playing out in the Gulf waters along with the signs of falling supply.

Hedge funds and other money managers raised their combined futures and option’s positions on U.S. crude for a second week and increased their positions in Brent crude as well, according to data from the U.S. Commodity Futures Trading Commission and the Intercontinental Exchange.

Oil jumps, Brent up more than 2% after US Navy downs Iranian drone

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Reuters
KEY POINTS
  • Brent crude futures were up $1.28 cents, or 2.1%, at $63.21 by 0329 GMT. They had dropped 2.7% on Thursday, falling for a fourth day that leaves them still set for a weekly drop of more than 5%.
  • West Texas Intermediate crude futures firmed 97 cents, or 1.8%, at $56.27. They ended 2.6% lower in the previous session, and are heading for a weekly decline of more than 6%.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices climbed around 2% on Friday after the U.S. Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows, again raising tensions in the Middle East.

Brent crude futures were up $1.28 cents, or 2.1%, at $63.21 by 0329 GMT. They had dropped 2.7% on Thursday, falling for a fourth day that leaves them still set for a weekly drop of more than 5%.

West Texas Intermediate crude futures firmed 97 cents, or 1.8%, at $56.27. They ended 2.6% lower in the previous session, and are heading for a weekly decline of more than 6%.

Indications that the U.S. Federal Reserve will cut rates aggressively to support the economy were also behind Friday’s gains, said Stephen Innes, managing partner at Vanguard Markets.

“The Fed backstop and the report of the U.S. Navy shooting down an Iranian drone are providing a modicum of support for oil markets amidst a very bearish landscape,” he said.

The United States said on Thursday that a U.S. Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

The move comes after Britain pledged to defend its shipping interests in the region, while U.S. Central Command chief General Kenneth McKenzie said the United States would work “aggressively” to enable free passage after recent attacks on oil tankers in the Gulf.

Still, the longer-term outlook for oil has grown increasingly bearish.

The International Energy Agency (IEA) is reducing its 2019 oil demand forecast due to a slowing global economy amid a U.S.-China trade spat, its executive director said on Thursday.

The IEA is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Fatih Birol said.

“China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies … if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come,” Birol told Reuters in an interview.

Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd but had already cut the growth forecast to 1.2 million bpd in June this year.

Speculators have exited options positions that could have provided exposure to higher prices in the next several years, market participants said on Thursday.

U.S. offshore oil and gas production has continued to return to service since Hurricane Barry passed through the Gulf of Mexico last week, triggering platform evacuations and output cuts.

Royal Dutch Shell, a top Gulf producer, said Wednesday it had resumed about 80% of its average daily production in the region.

Crude futures firm as US stockpiles of oil products gain

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Reuters
KEY POINTS
  • Brent crude futures were up 13 cents, or 0.2%, at $63.80 a barrel by 0237 GMT. They fell 1.1% on Wednesday.
  • U.S West Texas Intermediate crude futures were down 1 cent at $56.77. The U.S. benchmark dropped 1.5% in the previous session.
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 steadied on Thursday after falling in the previous session when official data showed U.S. stockpiles of products like gasoline rose sharply last week, suggesting weak demand during the peak driving season.

Brent crude futures were up 13 cents, or 0.2%, at $63.80 a barrel by 0237 GMT. They fell 1.1% on Wednesday.

U.S West Texas Intermediate crude futures were down 1 cent at $56.77. The U.S. benchmark dropped 1.5% in the previous session.

Oil prices have fallen this week as worries over a Middle East conflict have eased, oil production in the Gulf of Mexico has resumed after a storm and worries have emerged over Chinese economic growth.

The “easing of tensions between the U.S. and Iran, mixed Chinese growth data and storm-hit operations getting back online are all pressuring oil prices downward, ” said Alfonso Esparza senior market analyst at OANDA.

Japan’s exports fell for a seventh straight month in June, with shipments to China falling more than 10%, while Japanese manufacturers’ business confidence fell to a three-year low.

On the oil supply front, data on Wednesday from the U.S. Energy Information Administration showed a larger-than-expected draw down in crude stockpiles last week, but traders focused on large builds in refined product inventories dragging prices down.

U.S. crude inventories fell 3.1 million barrels, the EIA said, more than analysts’ forecasts for a decrease of 2.7 million barrels.

However, gasoline stocks rose 3.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel drop. Distillate stockpiles grew by 5.7 million barrels, much more than expectations for a 613,000-barrel increase, the EIA data showed.

“Gasoline consumption is painfully weak given U.S. consumers are in peak driving season,” said Stephen Innes, managing partner at Vanguard Markets.

Crude production was disrupted last week by Storm Barry, which came ashore on Saturday in central Louisiana as a Category 1 hurricane, the first major storm to hit the U.S. Gulf of Mexico this season.

More than half of daily crude production in the Gulf of Mexico remained offline by Tuesday, as most oil companies were re-staffing facilities to resume production.

The market shrugged of another incident involving a tanker in the Middle East amid tensions between the United States and Iran.

U.S. officials say they are unsure whether an oil tanker towed into Iranian waters was seized by Iran or rescued after facing mechanical faults as Tehran asserts, creating a mystery at a time of high tension in the Middle East.

Oil prices gain, US crude little changed after inventory data

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Reuters
KEY POINTS
  • West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.
  • Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.
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Stacked rigs are seen along with other idled oil drilling equipment in Dickinson, North Dakota, June 26, 2015.
Andrew Cullen | Reuters

Oil prices rose on Wednesday after steep falls in the previous session, although U.S. crude trailed gains for international benchmark Brent after U.S. crude inventories fell less than expected.

West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.

Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.

Crude inventories fell by 1.4 million barrels in the week to July 12 to 460 million, industry group the American Petroleum Institute (API) said on Tuesday. That compared with analysts’ expectations for a decrease of 2.7 million barrels.

Official data is due out later today from the U.S. government’s Energy Information Administration (EIA). If it confirms the fall it will be the fifth consecutive weekly decline, the longest stretch since the beginning of 2018.

“Market participants are looking ahead to the weekly IEA oil inventory data for the U.S., which is expected to show yet another draw down,” Abhishek Kumar, head of analytics at Interfax Energy in London.

“Nevertheless, oil production in the Gulf of Mexico returning to normal following Hurricane Barry will limit price gains, ” Kumar said.

More than half the daily crude production in the U.S. Gulf of Mexico remained offline on Tuesday in the wake of Hurricane Barry, the U.S. drilling regulator said, as most oil companies were re-staffing facilities to resume production.

The Bureau of Safety and Environmental Enforcement said 1.1 million barrels per day of oil, or 58% of the region’s total, and 1.4 billion cubic feet per day of natural gas output remained shut.

The smaller than expected decline in crude stocks suggested production shut-ins caused by Hurricane Barry late last week had little impact on inventories.

Gasoline stocks also fell, declining by 476,000 barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel decline.

Distillate fuels stockpiles, which include diesel and heating oil, rose by 6.2 million barrels, compared with expectations for a 613,000-barrel gain, the API data showed.

Oil prices fell on Tuesday after U.S. President Donald Trump said progress has been made with Iran, signaling tensions could ease in the Middle East.

However, Iran later denied it was willing to negotiate over its ballistic missile program, contradicting a claim by U.S. Secretary of State Mike Pompeo, and appearing to undercut Trump’s statement.

Tensions between the United States and Iran over Tehran’s nuclear program have lent support to oil futures, given the potential for a price spike should the situation deteriorate.