Oil slips as OPEC+ prepares to discuss deeper output cuts

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Reuters
KEY POINTS
  • Brent crude futures dipped 10 cents, or 0.2%, to $62.90 a barrel by 0547 GMT. Brent surged 3.6% on Wednesday.
  • West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.4%, to $58.21 a barrel. They settled up 4.2% on Wednesday.
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A oil rigger at the Schlumberger field prepares pipes in Midland, Texas on December 16, 2008.
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Oil prices fell in muted trading ahead of OPEC talks in Vienna later on Thursday, trimming some of the sharp gains made the previous session on both the possibility of producers agreeing further output cuts and a sharp drop in U.S. crude inventories.

Brent crude futures dipped 10 cents, or 0.2%, to $62.90 a barrel by 0547 GMT. Brent surged 3.6% on Wednesday.

West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.4%, to $58.21 a barrel. They settled up 4.2% on Wednesday.

Prices are now back roughly to the levels of a week ago, before they plunged on a lack of progress on resolving a 17-month-old China-U.S. trade war that has hit global growth and demand for oil.

U.S. President Donald Trump on Wednesday described trade talks with China as going “very well,” a day after saying it could take until after next year’s presidential election to complete an agreement.

Investor attention has switched to meetings of the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, and the possibility of more production cuts.

The so-called OPEC+ group has been curbing output since 2017 to counter surging production from the United States, which is now the world’s biggest oil producer. OPEC+ has been withholding about 1.2 million barrels per day of production.

OPEC is aiming to push for deeper reductions in output but needs the agreement of Russia and other oil producers to avoid a supply glut next year, after demand growth slowed in 2019, while many analysts are skeptical of further cuts.

“Saudi Arabia’s concerns about its loss of market share and little appetite for increased cuts in Russia, will win the day,” said Franziska Palmas, assistant economist at Capital Economics. “Accordingly, we expect OPEC+ to only roll over its current production quota at this week’s meeting.”

OPEC members will meet among themselves on Thursday and be joined on Friday by Russia and the other producers.

Oil prices surged on Wednesday after U.S. crude inventories fell by much more than expected, according to official figures.

Crude stockpiles fell by 4.9 million barrels last week, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll of a 1.9 million-barrel decline.

Still, gasoline and distillate stocks surged by a similar amount as crude’s decline, with refinery runs increasing ahead of winter stockpiling.

Gasoline stocks were up by 3.4 million barrel, double expectations in the Reuters poll. Distillate inventories jumped by nearly three times expectations, gaining 3.1 million barrels.

Oil rises before OPEC+ meet, lifted by drop in US crude stocks

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Reuters
KEY POINTS
  • Brent crude futures were up 35 cents, or 0.6%, at $61.17 a barrel by 0246 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up by 31 cents, or 0.6%, at $56.41.
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Azeri oil workers operate a large field of drilling rigs on October 12, 2003 outside the capital city of Baku, Azerbaijan.
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Oil prices rose on Wednesday ahead of a meeting of OPEC and its allies to discuss whether to extend production curbs to support the market, while industry data showing that U.S. crude stockpiles fell more than expected helped to lift prices.

Brent crude futures were up 35 cents, or 0.6%, at $61.17 a barrel by 0246 GMT.

U.S. West Texas Intermediate (WTI) crude futures were up by 31 cents, or 0.6%, at $56.41.

The Organization of the Petroleum Exporting Countries (OPEC) and allies that include Russia — a group known as OPEC+ — are preparing to approve deeper crude output cuts this week, when they meet in Vienna, according to Iraq, the group’s second-biggest producer.

Thamer Ghadhban, the oil minister of Iraq, told reporters on Tuesday in Vienna that “a deeper cut is being preferred by a number of key members.”

There is still some skepticism in the market over whether OPEC will cut output further, however, with many analysts expecting only an extension of existing cuts.

“We … think OPEC could announce an extension to supply cuts to cover the whole of 2020 rather than the three to six months the market is currently factoring in,” BNP Paribas Markets said in a note.

An extension “with an option to review policy at the next meeting, would send a strong message of commitment by signatories of the Declaration of Cooperation,” the BNP Paribas analysts said.

OPEC members meet on Thursday and then on Friday the OPEC+ group meets.

OPEC+ has been curbing supply since 2017 and is expected to keep the cuts in place to balance out record production in the United States.

Crude oil inventories in the U.S. fell by more than expected last week, according to the industry group American Petroleum Institute (API). Stockpiles of crude oil fell by 3.7 million barrels, more than double expectations of a decline of 1.7 million barrels.

Gasoline and distillate stocks increased, however, and the market will be looking for confirmation of the crude draw when official figures come out from the U.S. Department of Energy’s Energy Information Administration later on Wednesday.

Keeping a lid on prices are the dwindling prospects of a trade deal between the United States and China. The trade dispute between the world’s two biggest economies has weakened the global economy and held back oil demand growth.

U.S. President Donald Trump said on Tuesday an agreement to end the trade dispute may have to be delayed until after the American presidential election in November 2020.

“Both contracts should remain supported at these levels despite the (U.S.-China) trade concerns as the market looks to the start of the OPEC+ meeting tomorrow,” said Jeffrey Halley, senior market analyst at OANDA.

Oil rises over 1% on hopes for deeper OPEC cuts, Chinese factory growth

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Reuters
KEY POINTS
  • Brent crude futures rose 76 cents, or 1.3%, to $61.25 a barrel by 0415 GMT.
  • West Texas Intermediate (WTI) futures rose 91 cents, or 1.7%, to $56.08 a barrel, having risen by more than $1 earlier.
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Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
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Oil prices rose more than 1% on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand, and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.

Brent crude futures rose 76 cents, or 1.3%, to $61.25 a barrel by 0415 GMT. West Texas Intermediate (WTI) futures rose 91 cents, or 1.7%, to $56.08 a barrel, having risen by more than $1 earlier.

On Friday, WTI futures settled 5.1% lower while Brent plunged 4.4% on concerns that talks to end the trade war between the United States and China, the world’s two biggest oil users, would be disrupted by U.S. support for protesters in Hong Kong.

But oil rose on Monday after factory activity in November in China, the world’s biggest oil importer, increased for the first time in seven months because of rising domestic demand amid government stimulus measures.

“At the open, prices remain supported by the surprising resilient China factory activity with the forward-looking PMI’s beating expectations,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Prices were also supported after Iraq’s oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are expected to at least extend existing output cuts to June 2020 when they meet this week.

The OPEC+ group has coordinated output for three years to balance the market and support prices. Their current deal to cut supply by 1.2 million bpd that started from January expires at the end of March 2020.

OPEC’s ministers will meet in Vienna on Dec. 5 and the wider OPEC+ group will meet on Dec. 6.

Ministers will either take no action, extend the cuts without change, or deepen them, ING Economics said in a note.

“We believe that only the final scenario would be constructive for oil prices,” ING said.

OPEC oil output fell in November as Angolan production slipped due to maintenance and Saudi Arabia kept a lid on supply to support prices before the initial public offering of state-owned Saudi Aramco, a Reuters survey found.

On average, OPEC pumped 29.57 million bpd last month, according to the survey, down 110,000 bpd from October’s revised figure.

But U.S. production keeps rising, filling the gaps left by OPEC, with output in September increasing to a new record of 12.46 million barrels per day (bpd), the U.S. government said in a monthly report on Friday.

Oil slips amid slow holiday trade before OPEC+ meeting

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Reuters
KEY POINTS
  • Brent crude futures declined 28 cents, or 0.4%, at $63.59 a barrel by 0547 GMT.
  • West Texas Intermediate (WTI) futures were down 15 cents, or 0.3%, at $57.97 a barrel.
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A photo taken August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
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Oil prices slipped on Friday in quiet trade with the U.S. Thanksgiving holiday limiting activity, while investors awaited a meeting of OPEC and its allies next week that may result in the extension of an output cut agreement to support the market.

Brent crude futures declined 28 cents, or 0.4%, at $63.59 a barrel by 0547 GMT. Brent futures are set for a slight gain of 0.3% for the week, the fourth weekly increase, during which prices have climbed 3.1%.

West Texas Intermediate (WTI) futures were down 15 cents, or 0.3%, at $57.97 a barrel.

For the week, WTI is set to gain 0.4%, the fourth weekly increase, during which prices have risen 3.2%.

Next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, is high on investors’ list of things to watch.

The group has agreed to cut its output by 1.2 million barrels per day through to March to support prices and analysts expect the agreement to be extended as U.S. production keeps hitting records.

“It is highly probable that the group will rollover the deal in its current form until at least the end of 2020, but we see limited scope for a new round of cuts, in light of uneven compliance and diminishing returns,” Fitch Solutions said in a note.

Russian oil companies proposed on Thursday not to change their output quotas, putting pressure on OPEC+ to avoid any major shift in the policy when the group meets in Vienna on Dec. 5-6.

Still, “risk-neutral is an excellent spot to be ahead of the weekend as there is a ton of headline risk that could upset the apple cart,” said Stephen Innes chief Asia market strategist at AxiTrader.

China warned the United States on Thursday that it would take “firm countermeasures” in response to U.S. legislation backing anti-government protesters in Hong Kong.

Investors are concerned any such move by China would further delay a preliminary agreement with the United States to end their trade war that has held back growth in global economies and in the consumption of oil.

Oil slips as US stocks rise, but hopes for US-China trade deal stem losses

CNBC

Reuters
KEY POINTS
  • Brent crude futures dropped 15 cents, or 0.23%, to $64.12 a barrel by 0421 GMT.
  • West Texas Intermediate (WTI) crude futures fell 16 cents, or 0.27%, to $58.25 per barrel.
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The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
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Oil eased on Wednesday following an industry report showing a surprise build in U.S. crude stockpiles, but hopes surrounding the signing of the first phase of a U.S.-China trade deal prevented a bigger drop in prices.

Brent crude futures dropped 15 cents, or 0.23%, to $64.12 a barrel by 0421 GMT, while West Texas Intermediate (WTI) crude futures fell 16 cents, or 0.27%, to $58.25 per barrel.

Wednesday’s decline reversed two days of gains, with WTI climbing 1.1% through Tuesday and Brent gaining 1.4% during the period, on the expectation that China and the United States, the world’s two biggest crude oil users, would soon sign a preliminary agreement beginning an end to their 16-month trade war.

But data from industry group the American Petroleum Institute late on Tuesday showed U.S. crude stocks rose by 3.6 million barrels in the week to Nov. 22 to 449.6 million, compared with analysts’ expectations for a decrease of 418,000 barrels.

“Strong builds in U.S. inventories have kept bullish gains measured as markets remain cautious over shaky economic fundamentals and demand-side concerns,” said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

Later on Wednesday the U.S. Energy Information Administration (EIA) is due to publish official inventory data.

“If the (EIA) numbers are similar to the API, this would be the fifth straight week of stock builds, and would not be the most constructive reading for WTI as we head into the Thanksgiving holiday,” ING analyst Warren Patterson said in a note.

Still, optimism on global trade, along with market expectations for an extension in supply curbs by the Organization of the Petroleum Exporting Countries (OPEC) and associates, have supported oil prices, Phillip Futures analyst Lu said.

U.S. President Donald Trump said on Tuesday that the United States and China are close to agreement on the first phase of their trade deal, after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.

Elsewhere OPEC and its production-cutting allies, a grouping known as ‘OPEC+’, will begin holding meetings on Dec. 4 in Vienna to examine output policy.

A meeting of the OPEC+ group on Dec. 6 will make a final announcement on the future policy, with an extension of curbs, possibly until June, the expected outcome.