Oil sinks on weak China data, fading Saudi supply concerns

CNBC

Reuters
KEY POINTS
  • Brent crude futures fell 49 cents, or 0.8%, from the previous session’s close to $62.25 a barrel by 0603 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $56.18 a barrel.
GP: Saudi Arabia oil processing plant damaged 190920
A damaged installation in Saudi Arabia’s Abqaiq oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices fell on Friday after fresh Chinese economic data revived concerns of slowing economic growth, and while a faster-than-expected recovery in Saudi crude oil output this week eased concerns of major supply disruptions.

“Oil prices continued to slide lower after a drop in China’s industrial profits in August reinforced worries that the world’s second-largest economy continues to decelerate,” said Edward Moya, senior market analyst at OANDA.

Chinese industrial firms reported a contraction in profits in August, reversing the previous month’s brief expansion, as weak domestic demand and a trade war with the United States weighed on corporate balance sheets.

Brent crude futures fell 49 cents, or 0.8%, from the previous session’s close to $62.25 a barrel by 0603 GMT.

U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $56.18 a barrel.

The rapid return of oil production from top world exporter Saudi Arabia less than two weeks after the Sept. 14 attacks also squashed risk premiums and dragged crude prices lower, analysts said.

“For most of the week … the market has been trading lower as oil bulls have been discouraged by the quicker-than-expected return of Saudi oil output,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

WTI futures were down 3.3% so far for the week, marking the largest weekly loss in 10 weeks, while Brent was down 3.2% on the week, its largest weekly loss in seven.

A surprise 2.4 million-barrel build in U.S. crude inventories last week also weighed on prices.

U.S. inventories may rise further over the near term, further pressuring prices, as American refiners curb runs for maintenance, analysts said.

“The expected lower demand for oil inputs into (U.S.) refineries typically sees U.S. crude inventories swell, all of which could pose a significant downside risk for prompt oil prices,” Innes said.

Emerging details connected to the impeachment inquiry into U.S. President Donald Trump also helped dent demand sentiment, analysts said.

“Trump’s impeachment inquiry also raises uncertainty surrounding his foreign policy,” said Margaret Yang Yan, a market analyst at CMC Markets, particularly on Iran and China.

“The market is assessing how this political turbulence may affect his ability and position to impose further sanctions on Iran, which will have significant impact on global oil supply.”

Oil prices steady amid concerns of rising supplies and sluggish demand

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Reuters
KEY POINTS
  • Brent crude futures were at $62.36 a barrel, down 3 cents, or 0.05%, from the previous close, by 0555 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were 2 cents lower, or 0.04%, to $56.47 a barrel.
GP: Oil tank North Dakota 190926
Photo taken August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices were steady on Thursday after falling the previous two sessions on industry concerns about rising supplies and signs of slowing demand.

Brent crude futures were at $62.36 a barrel, down 3 cents, or 0.05%, from the previous close, by 0555 GMT.

U.S. West Texas Intermediate (WTI) crude futures were 2 cents lower, or 0.04%, to $56.47 a barrel.

Brent prices have dropped 3.6% since the close on Monday, while WTI is down 3.7% over the same period, weighed down by a surprise 2.4 million-barrel build in U.S. crude inventories last week and a faster than expected recovery of Saudi production capacity after the Sept. 14 attacks on its production plants.

Prices found slight support on hopes that the U.S.-China trade dispute may ease, potentially boosting oil demand.

U.S. President Trump said on Wednesday — a day after a stinging rebuke to China for its trade practices — that Beijing wanted to make a deal “very badly” and that a deal “could happen sooner than you think.”

Trump and Japanese Prime Minister Shinzo Abe also signed a limited trade deal that would open up Japanese markets to some $7 billion worth of U.S. products annually.

Aside from that, analysts said there was little to help lift crude futures higher.

“There’s not too much to be cheery about on oil markets today,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

“Saudi Arabia is restoring production much faster than expected (and) the EIA crude inventories came in higher,” said Halley.

Both Brent and WTI on Wednesday fell to their lowest since the attacks on Saudi Arabia.

Crude futures were also pressured by sluggish economic data in leading European economies and Japan, analysts said.

“Fundamentally, a much weaker than expected Germany manufacturer PMI data painted a tepid outlook for energy demand,” said Margaret Yang, market analyst at CMC Markets.

“This bearish outlook is further strengthened by a rise in U.S. crude oil stockpile in the past weeks,” said Yang.

A firmer dollar, which posted its sharpest daily gain in three months overnight and held steady in Asian trade, also weighed on oil prices as it makes dollar-traded fuel imports more costly for countries using other currencies.

“Baring new inputs to adjust price expectations, both contracts are in grave danger of fully unwinding their Saudi attack rallies and retesting their pre-attack lows, around $60.00 and $54.00 respectively,” said Halley.

Oil extends losses after Trump douses trade talk optimism

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Reuters
KEY POINTS
  • Brent crude futures fell 47 cents to $62.63 a barrel by 0442 GMT.
  • U.S. West Texas Intermediate crude dropped to $56.94, down 35 cents.
GP: Oil rig 180102
Oil pumpjacks in silhouette at sunset.

Oil prices fell on Wednesday for a second day on worries that fuel demand could fall after U.S. President Donald Trump doused recent optimism over China-U.S. trade talks and reignited concerns about global economic growth.

Brent crude futures fell 47 cents to $62.63 a barrel by 0442 GMT, while U.S. West Texas Intermediate crude dropped to $56.94, down 35 cents.

Both benchmarks have fallen to their lowest level since before the attack on Saudi Arabian oil facilities on Sept. 14.

“What really pulled the rug from underneath oil was Donald Trump’s comments on trade last night … He’s still maintaining quite a belligerent position,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

Trump criticized China’s trade practices at the United National General Assembly on Tuesday and said he would not accept a “bad deal” in U.S.-China trade negotiations.

China is the world’s largest oil importer and second-largest crude user. The United States is the largest consumer of oil.

Trump also said he saw a path to peace with Iran even as he denounced Iran for “bloodlust”, cooling other risk premiums built into oil prices.

Oil rallied last week following a crippling attack on Saudi Arabia’s oil installations that has disrupted supplies from the world’s top exporter. To meet its supply obligations to Saudi refineries overseas, Saudi Aramco is buying oil from other Middle East producers.

“Right now, the market is very concerned about the demand side of the equation, but I would caution against being complacent about what’s happening in the Middle East,” said Howie Lee, an OCBC economist.

Saudi’s crude oil stockpiles could run out within two months, and that could prompt buyers to look for supplies in the spot market and push prices higher again, Lee said.

Prices were also weighed down by an unexpected build in U.S. crude inventories last week.

U.S. crude inventories rose 1.4 million barrels last week, the American Petroleum Institute said on Tuesday, compared with analysts’ forecasts of a 200,000-barrel draw down.

Official government data from the U.S. Energy Information Administration will be released later today.

Oil slips as focus shifts from Saudi supply to global demand concerns

CNBC

Reuters
KEY POINTS
  • Brent crude futures fell 35 cents to $64.42 a barrel by 0408 GMT.
  • U.S. West Texas Intermediate (WTI) futures  were at $58.36, down 28 cents.
GP: Rosneft oil refinery Russia 190125
A general view of the Novokuibyshev Refinery owned by Rosneft oil company on March 15, 2012 in Novokuibyshevsk, Samara region, Russia.
Sasha Mordovets | Getty Images

Oil prices eased on Tuesday as weak manufacturing data from Europe and Japan focused market attention on the gloomy outlook for demand and away from uncertainty around supply disruptions in Saudi Arabia.

Brent crude futures fell 35 cents to $64.42 a barrel by 0408 GMT, while U.S. West Texas Intermediate (WTI) futures were at $58.36, down 28 cents.

“The demand side of the equation is back in focus,” said Michael McCarthy, senior market analyst at CMC Markets in Sydney, pointing to sluggish manufacturing numbers in leading economies in Europe as well as Japan.

“That’s why we’re seeing a little bit more (downward) pressure on Brent than West Texas at the moment.”

Still, oil prices remained at comparatively elevated levels for the year in the wake of the Sept. 14 attack on Saudi Arabia’s largest oil processing facility that halved output in the world’s top oil exporter.

Reuters reported that Saudi Arabia has restored more than 75% of crude output lost after the attacks on its facilities and will return to full volumes by early next week. But the Wall Street Journal reported on Monday that repairs at the plants could take months longer than anticipated.

“Nine days after the oil facility attack in Saudi Arabia (SA), we still see divergent market views on when the damaged supplies will be restored,” analysts at Nomura said in a note.

“While the damaged plants may be repaired in the next couple of weeks, increasing actual oil supplies may require monitoring.”

European powers — Britain, Germany and France — backed the United States in blaming Iran for the Saudi oil attack, urging Tehran to agree to new talks with world powers on its nuclear and missile programs and regional security issues.

Meanwhile a preliminary Reuters poll found on Monday that U.S. crude oil and distillate stockpiles were expected to have dropped last week.

Seven analysts polled by Reuters estimated, on average, that crude inventories fell 800,000 barrels in the week to Sept. 20.

The poll was conducted ahead of key reports from the American Petroleum Institute, an industry group, to be released on Tuesday and from the Energy Information Administration on Wednesday.

Middle East tensions lift oil prices more than 1%

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Reuters
KEY POINTS
  • Brent crude futures touched an intra-day high of $65.50 a barrel, but eased to $64.97, up 69 cents by 2323 GMT.
  • U.S. West Texas Intermediate crude futures were at $58.78 a barrel, up 69 cents, after earlier hitting a high of $59.39.
GP: Oil refinery at Corio silhouetted at sunset 190923
Richard I’Anson | Lonely Planet Images | Getty Images

Oil prices gained more than 1% to hit their highest levels in two sessions at the start of Monday’s trade as Middle East tensions remained elevated, supporting prices.

The Pentagon has ordered additional troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defenses following an attack on Saudi oil facilities.

U.S. Secretary of State Mike Pompeo said on Sunday that the troops are for “deterrence and defence” and Washington aimed to avoid war with Iran.

Brent crude futures touched an intra-day high of $65.50 a barrel, but eased to $64.97, up 69 cents by 2323 GMT.

U.S. West Texas Intermediate crude futures were at $58.78 a barrel, up 69 cents, after earlier hitting a high of $59.39.

In the United States, the impact of Tropical Storm Imelda on refineries in Texas has eased as Exxon Mobil and Valero restarted their crude processing units over the weekend.