Oil prices climb after Saudi oilfield attack, but recession worries drag

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Reuters
KEY POINTS
  • Brent crude was up 64 cents, or about 1.1%, at $59.28 a barrel at 0255 GMT,
  • U.S. crude was up 55 cents, or 1%, at $55.42 a barrel.
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A pump jack and pipes at an oil field near Bakersfield, California.
Lucy Nicholson | Reuters

Crude oil prices rose on Monday following a weekend attack on a Saudi oil facility by Yemeni separatists and as traders looked for any signs that Sino-U.S. trade tensions could ease.

But price gains were capped by an unusually downbeat OPEC report that stoked concerns about growth in oil demand.

Brent crude was up 64 cents, or about 1.1%, at $59.28 a barrel at 0255 GMT,

U.S. crude was up 55 cents, or 1%, at $55.42 a barrel.

“Oil is benefiting from an overall optimism that we won’t see the doomsday trade war scenario and after a drone attack on oil and gas facilities in Saudi Arabia reminded markets geopolitical tensions in the Middle East are going nowhere anytime soon, ” said Edward Moya, senior market analyst at OANDA in New York.

A drone attack by Yemen’s Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.

Meanwhile, White House economic adviser Larry Kudlow said trade deputies from the United States and China would speak within 10 days and could advance negotiations over ending a trade battle between the two countries if those talks pan out.

But U.S. President Donald Trump appeared less optimistic than his aides on striking a trade deal with China, saying that while he believed Beijing was ready to come to an agreement, “I’m not ready to make a deal yet.”

Concerns about an economic recession continued to weigh on crude prices even as Trump and top White House officials dismissed concerns that U.S. economic growth may be faltering.

Elsewhere, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.

It is rare for OPEC to give a bearish forward view on the market.

Also weighing on prices, U.S. energy firms this week increased the number of oil rigs operating for the first time in seven weeks despite plans by most producers to cut spending on new drilling this year.

Traders will also be looking out for key manufacturing data due later this week from Europe and the United States, said Michael McCarthy, chief market strategist, CMC Markets.

Oil rises as US retail sales ease recession fears

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KEY POINTS
  • Brent crude was up 52 cents, or 0.9%, at $58.75 a barrel at 0352 GMT, after falling 2.1% on Thursday and 3% the previous day.
  • U.S. crude was up 65 cents, or 1.2%, at $55.12 a barrel, having dropped 1.4% the previous session and 3.3% on Wednesday.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
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Crude oil prices rose on Friday following two days of declines, buoyed after data showing an increase in retail sales in the U.S. helped dampen concerns about a recession in the world’s biggest economy.

Brent crude was up 52 cents, or 0.9%, at $58.75 a barrel at 0352 GMT, after falling 2.1% on Thursday and 3% the previous day.

U.S. crude was up 65 cents, or 1.2%, at $55.12 a barrel, having dropped 1.4% the previous session and 3.3% on Wednesday.

U.S. retail sales rose 0.7% in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, according to data that came a day after a key part of the U.S. Treasury yield curve inverted for the first time since June 2007 prompting a sell-off in stocks and crude oil.

An inverted Treasury yield curve is historically a reliable predictor of looming recessions.

“The rebound has a corrective look about it on thin volumes, rather than a beachhead for an impending rebound,” said Jeffrey Halley, senior market analyst at OANDA. “Overall, U.S. data continues to be a bright spot in a dark economic universe.”

Gains are likely to be capped after a week of data releases including a surprise drop in industrial output growth in China to a more than 17-year low, along with a fall in exports that sent Germany’s economy into reverse in the second quarter.

“The broader story around global economic growth has been a weak one, or a weakening one and expectations (are for) further weakening,” Phin Ziebell, senior economist at National Australia Bank, said by phone.

The price of Brent is still up nearly 10% this year thanks to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, a group known as OPEC+. In July, OPEC+ agreed to extend oil output cuts until March 2020 to prop up prices.

“At what point will further output cuts be needed at the back end of this year from OPEC and Russia to keep things going the way they are?” Zeibell said, given the broader economic outlook.

A Saudi official on Aug. 8 indicated more steps may be coming, saying “Saudi Arabia is committed to do whatever it takes to keep the market balanced next year.”

But the efforts of OPEC+ have been outweighed by worries about the global economy amid the U.S.-China trade dispute and uncertainty over Brexit, as well as rising U.S. stockpiles of crude and higher output of U.S. shale oil.

Oil prices fall on concerns over recession, inventories

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Reuters
KEY POINTS
  • Brent crude was down 37 cents, or 0.6%, at $59.11 a barrel by 0300 GMT, after falling 3% in the last session.
  • U.S. crude was down 25 cents, or 0.5%, at $54.98 a barrel, having dropped 3.3% in the previous session.
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Andrew Burton | Getty Images

Oil prices fell on Thursday, adding to sharp overnight losses as U.S. crude inventories unexpectedly rose, fears of recession mounted and economic data out of China and Europe disappointed.

Brent crude was down 37 cents, or 0.6%, at $59.11 a barrel by 0300 GMT, after falling 3% in the last session.

U.S. crude was down 25 cents, or 0.5%, at $54.98 a barrel, having dropped 3.3% in the previous session.

The combination of a slew of data suggesting a slowdown in global growth amid the U.S.-China trade war and persistently high levels of oil in U.S. storage has punctured recent optimism in crude markets, but stoked expectations that leading producers may take further steps to support prices.

“Oil prices, though supported by OPEC-led production curbs, … face severe headwinds as traders swing between demand-side worries and supply curtailment policies,” said Benjamin Lu, analyst at Phillip Futures in Singapore.

The Organization of the Petroleum Exporting Countries (OPEC) has been mostly trimming production since the start of 2017 and traders say they expect Saudi Arabia to reduce output further amid slowing global oil demand.

The U.S. Treasury bond yield curve inverted on Wednesday for the first time since 2007, a sign of investor concern that the world’s biggest economy may fall into recession.

China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the U.S. intensifies.

Global economic worries, amplified by tariff conflicts and uncertainty over Brexit, are also hitting European economies. A slump in exports sent Germany’s economy into reverse in the second quarter, data showed, while the euro zone’s GDP barely grew in the second quarter of 2019.

A second week of unexpected builds in U.S. crude inventories is adding to the pressure on oil prices.

U.S. crude stocks grew by 1.6 million barrels last week, compared with analyst expectations for a decrease of 2.8 million barrels, as refineries cut output, the Energy Information Administration (EIA) said in a report.

At 440.5 million barrels, inventories were about 3% above the five-year average for this time of year, the EIA said.

Oil prices slip as demand concerns outweigh efforts to curb supply

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KEY POINTS
  • Brent crude futures were down 18 cents or 0.3%, from the previous settlement, to $58.39 a barrel by 0310 GMT.
  • U.S. West Texas Intermediate (WTI) futures were at $54.81 per barrel, down by 12 cents, or 0.2%, from the last close.
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A worker grabs a nozzle at a PTT gas station in Bangkok, Thailand, January 5, 2016.
Athit Perawongmetha | Reuters

Oil prices slipped on Tuesday, offsetting narrow gains in the previous session, as sluggish demand forecasts countered expectations that major producers would prop up oil prices by limiting crude oil output.

International benchmark Brent crude futures were down 18 cents or 0.3%, from the previous settlement, to $58.39 a barrel by 0310 GMT.

U.S. West Texas Intermediate (WTI) futures were at $54.81 per barrel, down by 12 cents, or 0.2%, from the last close.

“Although the outlook remains bleak, oil prices have remained anchored this week after a rapid response from Saudi Arabia, who is serious about stepping in to defend the oil price,” Stephen Innes, managing partner at VM Markets said in a note.

Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said late last week it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories.

Analysts expect the country to support prices ahead of its plans to float Saudi Aramco, in what could be the world’s largest initial public offering (IPO).

Saudi Aramco was ready for its IPO, but the timing for the deal will be decided by its sole shareholder, the Saudi government, a senior executive said on Monday.

Kuwait on Monday also reiterated its commitment to OPEC+ supply curbs after Oil Minister Khaled al-Fadhel said Kuwait had cut its own output by more than required by the accord.

OPEC and its allies, known as OPEC+, have agreed to cut 1.2 million barrels per day (bpd) since Jan. 1.

But booming U.S. shale oil production continues to chip away at efforts to limit the global supply overhang, weighing on prices.

U.S. oil output from seven major shale formations is expected to rise by 85,000 bpd in September, to a record 8.77 million bpd, the U.S. Energy Information Administration forecast in a report.

Gloomy forecasts for the global economy and oil demand growth have also dragged on oil prices as the trade dispute between the United States and China escalates.

“The swift reaction from Saudi Arabia will likely stabilize oil prices, but the oil price probably won’t move much above $60 per barrel until there is evidence of progress in U.S.-China trade negotiations,” said Innes.

China’s central bank lowered its official yuan midpoint for the ninth straight day to a fresh 11-year low on Tuesday to reflect broad weakness in the local unit.

A lower yuan raises the cost of dollar-denominated oil imports in China, the world’s biggest crude oil importer.

Oil prices slip as demand outlook, trade dispute weigh

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Reuters
KEY POINTS
  • Oil prices dipped on Monday amid worries about an economic slowdown and the Sino-U.S. trade war, which have led to a cut in the growth outlook for oil demand.
  • International benchmark Brent crude futures were at $58.35 a barrel by 0249 GMT, down 18 cents, or 0.3%, from their previous settlement.
  • U.S. West Texas Intermediate (WTI) futures were at $54.29 per barrel, down 21 cents, or 0.4%, from their last close.
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A drilling crew secures a stand of drill pipe into the mouse hole on a drilling rig near Midland, Texas February 12, 2019.
Nick Oxford | Reuters

Oil prices dipped on Monday amid worries about an economic slowdown and the Sino-U.S. trade war, which have led to a cut in the growth outlook for oil demand.

International benchmark Brent crude futures were at $58.35 a barrel by 0249 GMT, down 18 cents, or 0.3%, from their previous settlement.

U.S. West Texas Intermediate (WTI) futures were at $54.29 per barrel, down 21 cents, or 0.4%, from their last close.

Both benchmarks fell last week, with Brent losing more than 5% and WTI falling about 2%.

“Oil prices are falling at the start of the trading week due to lower demand forecasts published last week and  pessimism about a U.S.-China trade deal,” said Alfonso Esparza, senior market analyst at OANDA in Toronto.

The U.S.-China trade dispute rocked global equity markets last week, while a surprise build in U.S. crude stocks added downward pressure to oil prices, which have lost around 20% from their 2019 peaks reached in April.

Goldman Sachs said in a note on Sunday that fears of the U.S.-China trade war leading to a recession were increasing and it expected a trade deal between the two countries to happen before the 2020 U.S. presidential election.

Mounting signs of an economic slowdown and a ratcheting up of the trade row have caused global oil demand to grow at its slowest pace since the financial crisis of 2008, the International Energy Agency (IEA) said on Friday.

The Paris-based agency cut its 2019 and 2020 global oil demand growth forecast to 1.1 million and 1.3 million barrels per day (bpd), respectively.

Elsewhere, Russia’s oil production rose to 11.32 million bpd on August 1-8, up from 11.15 million bpd on average in July, according to two industry sources familiar with the energy ministry data.

In July, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia agreed to extend their supply cuts until March 2020 to prop up oil prices.

In a sign of lower production in the United States, the weekly U.S. oil rig count, an early indicator of future output, fell for a sixth week in a row as producers cut spending on new drilling and completions.