Oil slips to $71, hit by talk of higher OPEC+ production

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Reuters

KEY POINTS
  • Analysts expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase.
  • Oil fell Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed.
  • OPEC and its allies are due to meet in June to decide whether to continue the arrangement.
Reusable: Oil worker 130728
Andrew Burton | Getty Images

Brent oil slipped to around $71 a barrel on Tuesday, pressured by expectations of higher U.S. inventories and concern about Russia’s willingness to stick with OPEC-led supply cuts.

Analysts on average expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase. The first of this week’s stockpile reports is due at 2030 GMT from the American Petroleum Institute.

“We have already seen these inventories going higher in the last week’s print,” said Naeem Aslam, chief market analyst at TF Global Markets in London.

“The rising inventory data has raised many questions for investors – no one wants to see the oil glut again.”

Brent crude, the global benchmark, was down 12 cents at $71.06 a barrel at 0801 GMT. U.S. West Texas Intermediate (WTI) crude gained 6 cents to $63.46.

While OPEC-led supply cuts have boosted Brent by more than 30 percent this year, gains have been limited by worries that slowing economic growth could weaken demand for fuel.

Oil also fell on Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed. Russia and the producer group may decide to boost output to fight for market share with the United States, TASS news agency ited Finance Minister Anton Siluanov as saying.

The Organization of the Petroleum Exporting Countries and other producers including Russia, an alliance known as OPEC+, have been cutting output since Jan. 1. They decide in June whether to continue the arrangement.

“There is a growing concern that Russia will not agree on extending production cuts and we could see them officially abandon it in the coming months,” said Edward Moya, senior market analyst at OANDA.

Oil bounces above $63 after slide, but glut worries persist

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  • American Petroleum Institute says U.S. crude oil inventories are falling.
  • Fearing a glut, OPEC pushes for a supply curb.
  • Trump support for Saudi Arabia makes oil supply cut harder, say analysts.

Oil bounced above $63 a barrel on Wednesday to claw back some of the previous day’s 6 percent plunge, lifted by a report of an unexpected decline in U.S. crude inventories.

The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories last week fell by 1.5 million barrels, easing concerns for now that a supply glut is building up.

“The move yesterday was extremely sharp; after such moves you expect to have some rebound,” said Olivier Jakob, analyst at Petromatrix. “The API reported a stock draw – it is not a big one but at least it’s not a 10-million-barrel build.”

Brent crude, the global benchmark, was up 92 cents to $63.45 per barrel at 0944 GMT and traded as high as $63.67. U.S. crudegained 98 cents to $54.41.

Yet Wednesday’s bounce did little to reverse overall market weakness. Crude fell more than 6 percent in the previous session and world equities tumbled as investors grew more worried about economic growth prospects.

Brent has fallen by more than 25 percent since reaching a 4-year high of $86.74 on Oct. 3, reflecting concern about forecasts of slowing demand in 2019 and record supply from Saudi Arabia, Russia and the United States.

Worried by the prospect of a new supply glut, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.

OPEC, plus Russia and other non-OPEC producers, is considering a supply cut of between 1 million barrels per day (bpd) and 1.4 million bpd at a Dec. 6 meeting, sources familiar with the issue have said.

Still, Saudi Arabia may find taking action to support prices harder, analysts say, given U.S. pressure to keep them low and President Donald Trump standing by the Saudi crown prince in the wake of the murder of journalist Jamal Khashoggi.

Trump vowed on Tuesday to remain a “steadfast partner” of Saudi Arabia despite saying that Saudi Crown Prince Mohammed bin Salman may have known about a plan to murder Khashoggi.

“It is more difficult to expect a supply cut when you have the U.S. president giving full support to Saudi Arabia and asking Saudi to maintain low prices,” Jakob said.

Analysts at JBC Energy said Trump’s statement “highlights the potential for political fallout for Saudi itself from a hefty cut in production.”

Oil extends losses as other markets fall, inventories rise

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  • Oil prices continued to decline on Thursday after suffering losses in the last session.
  • U.S. crude inventories increased more than expected last week, according to the American Petroleum Institute on Wednesday.

Oil prices fell to two-week lows on Thursday as they extended big losses from the previous session amid a rout in global stock markets, with oil also taking a hit from an industry report showing U.S. crude inventories rose more than expected.

Supply worries also eased as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida, even as it caused at least one death, injuries and widespread destruction.

Brent crude futures were down $1.22, or 1.5 percent, at $81.87 a barrel by 0237 GMT. They earlier touched their lowest since Sept. 28 at $81.61, after closing 2.2 percent lower on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were down by $1, or 1.4 percent, at $72.17, having also fallen to their lowest since Sept. 28. They dropped 2.4 percent in the previous session.

Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3 percent, its biggest one-day decline since February.

Technology shares tumbled on fears of slowing demand and concerns about U.S.-China tensions. Japan’s Nikkei 225 was down nearly 4 percent on Thursday.

“Ugly, very very ugly,” Greg McKenna an independent market strategist based near Sydney said in a morning note, referring to declines in global markets including oil.

U.S. crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said on Wednesday.

Crude inventories climbed by 9.7 million barrels in the week to Oct. 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, API said. [API/S]

The U.S. Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 a.m. EDT.

In the U.S. Gulf of Mexico, producers have cut daily oil production by roughly 42 percent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production.

While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total U.S. production,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

U.S. oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.

Oil stable but below recent highs as rising U.S. supplies threaten bull-run

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  • Oil prices stabilized on Wednesday with global benchmark Brent at $74.02 a barrel and U.S. crude at $67.84.
  • Many analysts say that the oil market slump that started in 2014 has ended and that a sustained price rally is likely due to supply disruptions and strong demand — especially from Asia.
  • A report from the American Petroleum Institute on Tuesday said U.S. crude inventories rose by 1.1 million barrels in the week to April 20.

Oil prices were stable on Wednesday, but were below more than three-year highs reached the previous session as rising U.S. fuel inventories and production dragged on an otherwise bullish market.

Brent crude oil futures were at 74.02 per barrel at 0020 GMT, up 16 cents, or 0.2 percent, from their last close, but were some way below the November-2014 high of $75.47 a barrel reached the previous day.

U.S. West Texas Intermediate (WTI) crude futures were up 14 cents, or 0.2 percent, at $67.84 per barrel. That was also off the late-2014 highs of $69.56 a barrel reached earlier in April.

Overall, many analysts say an oil market slump that started in 2014 has now ended and is turning into a sustained price rally due to supply disruptions and also strong demand, especially in Asia.

That’s due to production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market, but also because of political risk to supplies in the Middle East, Venezuela and Africa.

“Market sentiment is turning increasingly bullish towards the commodity,” said Lukman Otunuga, research analyst at futures brokerage FXTM.

Despite this, Otunga said “the sustainability of the rally is a concern” as it was fuelled largely by political risk in the Middle East.

“With rising production from U.S shale still a key market theme that continues to weigh on oil prices, it will be interesting to see how much oil appreciates before bears enter the scene,” he said.

U.S. crude oil production has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd. Only Russia currently produces more, at almost 11 million bpd.

U.S. crude inventories rose by 1.1 million barrels in the week to April 20 to 429.1 million, according to a report by the American Petroleum Institute on Tuesday.

Official weekly U.S. fuel inventory and crude production data will be published later on Wednesday by the Energy Information Administration (EIA).

Oil prices near 2014 highs over warnings of western air strikes against Syria

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  • Oil prices edged higher on Wednesday, adding to steep gains in the previous session.
  • Markets eyed an escalation of Middle East tensions after Europe’s air traffic control agency warned of possible air strikes on Syria in the next 72 hours.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices edged higher on Wednesday, adding to steep gains in the previous session, as markets eyed an escalation of Middle East tensions after Europe’s air traffic control agency warned of possible air strikes on Syria in the next 72 hours.

Brent crude futures rose to $71.09 per barrel at 0104 GMT, up 7 cents from their last close. Brent surged more than 3 percent on Tuesday to hit its highest level since late 2014, at $71.34 a barrel.

U.S. WTI crude futures were at $65.63 a barrel, up 12 from their last settlement.

The United States and its allies are considering a strike against Syrian President Bashar al-Assad’s forces following a suspected poison gas attack last weekend.

Pan-European air traffic control agency Eurocontrol said air-to-ground and/or cruise missiles could be used within the next 72 hours, warning that there was a possibility of intermittent disruption of radio navigation equipment.

Although Syria itself is not a significant oil producer itself, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

Oil markets were also supported by easing concerns over a prolonged trade spat between the United States and China after China’s President Xi Jinping on Tuesday gave a speech with a conciliatory tone.

“The relaxation of tensions between the U.S. and China (is) allowing oil traders to exercise their worries over geopolitics,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Not all oil market indicators pointed to ongoing price rises, however.U.S. crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million, according to a report by the American Petroleum Institute on Tuesday, compared with analysts’ expectations for a decrease of 189,000 barrels.

And the U.S. Energy Information Administration said on Tuesday that it expects domestic crude oil production in 2019 to rise by more than previously expected, driven largely by growing U.S. shale output.

In its monthly short-term energy outlook, the agency forecast that U.S. crude oil output will rise by 750,000 barrels per day to 11.44 million bpd next year. Last month, it expected a 570,000 bpd year-over-year increase to 11.27 million bpd.

That will likely make the United states the world’s biggest oil producer by 2019, surpassing Russia which currently pumps out almost 11 million bpd.