Crude oil is getting crushed, but one expert sees year-end rally

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Oil expert sees oil heading higher after a volatile week for crude

Oil expert sees oil heading higher after a volatile week for crude  

Crude oil just posted its worst week since July as a surging dollar, slowing emerging markets and supply concerns have all weighed on the commodity. But despite the price declines, one commodities trader sees a rally in the cards.

Bill Baruch, president of Blue Line Futures, told CNBC’s “Trading Nation” on Thursday what investors can expect next. Here’s what he said.

· A bearish inventory report earlier in the week pushed oil down to its lowest level since June, but crude bulls still have reasons to feel good. For instance, it’s easy to forget crude oil is still trading near multiyear highs, with a gain of 9 percent year to date and 40 percent in the last 12 months.

· One of the biggest stories weighing on crude may be set to dissipate and take some pressure off the commodity: trade tension between the U.S. and China. We may see meaningful headway on trade over the coming weeks, and fears of slowing growth in China may be alleviated.

· My biggest concern, however, is spare capacity. Saudi Arabia promised to ramp up crude production in July, but it actually fell 200,000 barrels per day. Still, the U.S. estimated that production in the lower 48 states has stalled over the last three weeks, and tighter spare capacity can be extremely bullish.

· During this seasonally weak time for crude, investors should look to buy pullbacks; the technical picture should support this strategy. There is tremendous support from $62.50 to $64.50 per barrel, and oil should be positioned to rally back up to between $70 and $80 per barrel later this year. The key level to the downside would be $62.

Bottom line: Despite a 3 percent decline in crude oil this week, Baruch sees the commodity surging into year-end.

Oil rises as China, US set for trade talks, but markets weary of slowing demand

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  • Oil prices on Thursday recouped some of the previous day’s losses.
  • Beijing said it would send a delegation to Washington to try to resolve trade disputes between the United States and China that have roiled global markets.

Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.

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Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.

Oil prices on Thursday recouped some of the previous day’s losses after Beijing said it would send a delegation to Washington to try to resolve trade disputes between the United States and China that have roiled global markets.

Brent crude oil futures were at $71.03 per barrel at 0455 GMT, up 27 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 5 cents at $65.06 a barrel, held back somewhat by rising U.S. crude production and storage levels.

Both benchmarks lost more than 2 percent during the previous day’s trading.

Traders said Thursday’s markets were pushed up by news that a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will hold talks with U.S. representatives led by Under Secretary of Treasury for International Affairs David Malpass later in August.

China and the United States have implemented several rounds of tit-for-tat tariffs on each others goods and threatened further tariffs on exports worth hundreds of billions of dollars.

Sentiment in oil markets was also cautious due to the rise in U.S. crude production and storage levels as well as weakness in emerging market economies, especially in Asia, that could limit demand growth.

Oil prices sink to lows not seen since June

Oil prices sink to lows not seen since June  

Output of U.S. crude rose by 100,000 barrels per day (bpd) in the week ending Aug. 10, to 10.9 million bpd, according to the U.S. Energy Information Administration (EIA) weekly production and storage report.

At the same time, U.S. crude inventory levels climbed by 6.8 million barrels, to 414.19 million barrels, the EIA said.

“This build certainly hasn’t helped market sentiment,” Dutch bank ING said after the release of the EIA report.

While supply rose in the United States, Asia’s markets were showing signs of economic slowdown due to trade disputes with the United States and currency weakness, dragging on oil market sentiment.

“Oil prices continue to exude for bearish signals as investors worry on weaker global demand and rising production levels,” Benjamin Lu of Singapore-based brokerage Phillip futures wrote in a note.

In Japan, official data on Thursday showed a slowdown in export growth as well as a decline in crude oil imports.

Asia’s currencies also remained under pressure, with the dollarholding near 13-month peaks on Thursday as political turmoil in Turkey and concerns about China’s economic health continued to support safe-haven assets.

Providing Brent crude with some support were looming U.S. sanctions against Iran’s oil exports, set to start from November, with Asian buyers including India, South Korea and Japan already scaling back orders in anticipation.

“The might of U.S sanctions has shown… as petroleum importers have reduced purchase orders from Tehran,” Lu said.

Oil dips on rising US crude inventories, darkening economic outlook

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  • Oil prices fell on Wednesday, pulled down by a report of increased U.S. crude inventories.
  • A darkening economic outlook stoked expectations of lower fuel demand.

Oil pumps wells Monterey Shale fracking

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Oil prices fell on Wednesday, pulled down by a report of increased U.S. crude inventories and as a darkening economic outlook stoked expectations of lower fuel demand.

Front-month Brent crude oil futures were at $72.33 per barrel at 0408 GMT, down by 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 25 cents, or 0.4 percent, at $66.79 per barrel.

U.S. crude stocks rose by 3.7 million barrels in the week to Aug. 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.6 million barrels, the API said.

“Oil prices … fell after the API inventory data showed an unexpected crude build last week,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Oil prices down on demand fears amid Turkey crisis

Oil prices down on demand fears amid Turkey crisis  

Official U.S. fuel inventory data is due to be published later on Wednesday by the Energy Information Administration.

Sentiment was also clouded by a darkening economic outlook which could start impacting oil demand, traders said.

The OECD’s composite leading indicator, which covers the western advanced economies plus China, India, Russia, Brazil, Indonesia and South Africa, peaked in January but has since fallen and slipped below trend in May and June.

World trade volume growth also peaked in January at almost 5.7 percent year-on-year, but nearly halved to less than 3 percent by May, according to the Netherlands Bureau for Economic Policy Analysis.

BMI Research said oil markets would “struggle for direction, as uncertainty around both the impact on supply from the Iranian sanctions and escalating trade tensions between the U.S. and China persists.”

Oil prices edge up as Saudi cuts output, but looming demand slowdown drags 

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  • Oil prices rose on Tuesday after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices rose on Tuesday after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply.

Front-month Brent crude oil futures were at $72.87 per barrel at 0111 GMT, up 26 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $67.52 per barrel.

In July, Saudi Arabia told the producer group of the Organization of the Petroleum Exporting Countries (OPEC) that it had cut production by 200,000 barrels per day (bpd) to 10.288 million bpd.

OPEC’s monthly report published on Monday, which uses data from secondary sources, confirmed the Saudi cut, which traders said triggered crude’s upward move early on Tuesday.

That came despite the Saudi move coming in anticipation of a slowdown in oil demand.

Oil prices down on demand fears amid Turkey crisis

Oil prices down on demand fears amid Turkey crisis  

The OPEC report said it expected world oil demand to grow by 1.43 million bpd in 2019, down from 1.64 million bpd in 2018.

OPEC said the demand slowdown would come on the back of potentially lower economic growth as a result of trade disputes between the United States and China as well as emerging market turmoil.

Despite this, OPEC said overall oil demand would likely remain healthy.

Oil dips as trade tensions drag; Iran sanctions provide some support

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  • Oil prices dipped on Tuesday as rising trade tensions dented the outlook for fuel demand growth especially in Asia.
  • U.S. sanctions against Iran still pointed towards tighter supply.

An oil pump jack in Gonzales, Texas.

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An oil pump jack in Gonzales, Texas.

Oil prices dipped on Tuesday as rising trade tensions dented the outlook for fuel demand growth especially in Asia, although U.S. sanctions against Iran still pointed towards tighter supply.

Front-month Brent crude oil futures were at $72.60 per barrel at 0338 GMT, down by 21 cents, or 0.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 5 cents at $67.58 per barrel.

Signs of slowing economic growth and lower fuel demand increases, especially in Asia’s large emerging markets are weighing on the oil markets.

“Demand growth from Asia in general is being called into question. This due to the negative impact of trade wars, a stronger dollar and rising funding costs,” Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said in a note late last week.

Despite the gloomy outlook for trade and the potential slowdown in economic growth, oil markets are expected to remain relatively tight, particularly as U.S. sanctions on Iran have started.

“If markets really go into a funk, I’d expect oil to be part of that. But the complicating factor right now is Iran and the sanctions,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Because of the conflicting factors in oil markets, McKenna said “I’m staying out of oil at the moment.”

The United States has started implementing new sanctions against Iran, which from November will also target the country’s petroleum sector. Iran is the third-largest producer among the members of the Organization of the Petroleum Exporting Countries.

“With U.S. sanctions on Iran back in place … maintaining global supply might be very challenging,” ANZ bank said on Monday, although it added that “the U.S. is doing its bit to increase production, with data showing drilling activity is continuing to rise.”

U.S. energy companies last week added the most oil rigs since May, adding 10 rigs to bring the total count to 869, according to the Baker Hughes energy services firm.

That was the highest level of drilling activity since March 2015.

However, keeping with the bearish tone of the market, hedge funds and other money managers reduced their bullish positions in U.S. crude futures and options in the week ending on Aug. 7, data from the U.S. Commodity Futures Trading Commission showed on Friday.

The speculator group cut its combined net-long position in New York and London by 9,117 contract to 397,885 during the week, the lowest since June 19, the data showed.