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

CNBC

  • 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

CNBC

  • 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.

Oil prices seesaw as US trade dispute with China rattles market

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  • Oil prices dipped on Tuesday, easing after strong gains in the previous session.
  • Despite a softening of trade concerns, oil markets still face an abundance of supplies.
  • The American Petroleum Institute is due to publish oil storage data later on Tuesday while official data from the U.S. Energy Information Administration is due on Wednesday.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices dipped on Tuesday, easing after strong gains in the previous session when hopes that trade disputes between the United States and China could be resolved buoyed global markets.

Despite a softening of trade concerns, oil markets still face an abundance of supplies that puts pressure on producers to keep their prices competitive in order not to lose market share.

U.S. WTI crude futures were at $63.26 a barrel at 0031 GMT, down 16 cents, or 0.3 percent, from their previous settlement.

Brent crude futures were at $68.52 per barrel, down 13 cents, or 0.2 percent.

The dips came after a more than 2 percent rally on Monday during European and American trade hours.

“Oil prices rose sharply (on Monday) as a weaker U.S.-dollar and easingconcerns about the trade war saw investor appetite return,” ANZ bank said.

“Reports that back-channel talks over the trade dispute between the U.S. and China are ongoing helped soothe investor angst,” it added.

Concerns of a prolonged trade dispute between the world’s two biggest economies and uncertainty over the supply and demand balance of global oil markets have resulted in volatile yet range-bound recent trading.

“Oil prices remain rangebound with WTI oil right in the middle of the $60-$65 per barrel range that has largely held since January of this year,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

“U.S. oil inventories had been rising for the past couple of months but the data released last week showed an unexpected draw. This week’s data may be crucial for determining the direction of WTI,” he added.

The American Petroleum Institute is due to publish oil storage data later on Tuesday while official data from the U.S. Energy Information Administration is due on Wednesday.

Oil markets have generally been supported by healthy demand as well as supply restraint led by the Organization of the Petroleum Exporting Countries.

However, soaring U.S. crude production, which has jumped by a quarter since mid-2016 to 10.46 million barrels per day (bpd), is threatening to undermine OPEC’s efforts to tighten the market and prop up prices.

The United States late last year overtook top exporter Saudi Arabia as the world’s second biggest crude producer. Only Russia pumps more crude out of the ground, at almost 11 million bpd.

In a sign that oil supplies remain ample, China’s Sinopec, Asia’s largest refiner, plans to cut Saudi crude imports in May by 40 percent, instead buying from alternative sources, after Saudi Aramco set higher-than-expected prices, a company official said on Monday.