US oil falls for sixth day as supply fears mount

CNBC

  • U.S. oil prices fell for a sixth day on Friday after Iran announced plans to boost production and U.S. crude output hit record highs.

Oil fracking California

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U.S. oil prices fell for a sixth day on Friday after Iran announced plans to boost production and U.S. crude output hit record highs, adding to concerns about a sharp rise in global supplies.

The falls come amid a rout in global share markets as inflation fears grip investors.

U.S. West Texas Intermediate (WTI) crude was down 63 cents, or 1 percent, at $60.52 by 0015 GMT. On Thursday, it closed down 64 cents, or 1 percent, to settle at $61.15, its lowest close since Jan. 2.

Brent futures were yet to trade. On Thursday, Brent fell 70 cents, or 1.1 percent, to settle at $64.81 a barrel, their lowest close since Dec. 20.

OPEC member Iran on Thursday announced plans to increase production within the next four years by at least 700,000 barrels a day.

The U.S. Energy Information Administration (EIA) this week said crude production last week rose to a record high of 10.25 million barrels per day (bpd).

At that level, U.S. production would overtake current output in Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries.

OPEC and other producers, including Russia, have cut production since January 2017 to force down global inventories, but these cuts have been offset by rising U.S. oil production.

US oil prices extend gains on compliance with output cuts

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  • U.S. oil rose for a third day on Friday after a survey showed strong compliance with output cuts by OPEC and others.

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil rose for a third day on Friday after a survey showed strong compliance with output cuts by OPEC and others including Russia, offsetting concerns about surging U.S. production.

Brent futures, the global benchmark, were up 19 cents, or 0.3 percent, at $69.84 a barrel by 0352 GMT.

U.S. West Texas Intermediate (WTI) crude was up 28 cents, or 0.4 percent, at $66.08 a barrel.

Production by the Organization of the Petroleum Exporting Countries (OPEC) rose in January from an eight-month low as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela and strong compliance with a supply reduction pact, a Reuters survey showed.

OPEC pumped 32.4 million barrels per day (bpd) in January, the survey found, up 100,000 bpd from December. Last month’s total was revised down by 110,000 bpd to the lowest since April 2017.

Even so, adherence by producers included in the deal to curb supply rose to 138 percent from 137 percent in December, the survey found, suggesting commitment is not wavering even as oil prices hit their highest level since 2014.

“It underscores the commitment of the cartel, and their Russian partners, to keep a floor under the oil price,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

That is drawing investors’ focus away from the rise in U.S. production.U.S. crude output surpassed 10 million bpd in November for the first time since 1970, the Energy Information Administration said this week.

Oil steadies as Middle East tensions offset concern over China demand

CNBC

  • China’s October crude imports fall to 1-year low
  • But ongoing OPEC-led supply cuts support crude prices
  • Traders concerned about rising Middle East tension

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil steadied on Wednesday as Chinese crude imports fell to a one-year low, but losses were offset by investor caution over rising political tensions in the Middle East.

Traders said they were closely watching escalating tensions in the Middle East, especially between regional rivals Saudi Arabia and Iran.

Brent futures were at $63.80 a barrel at 1005 GMT, up 11 cents, while U.S. West Texas Intermediate (WTI) futureswere down 8 cents at $57.12 a barrel.

Brent crude hit $64.65 earlier this week, its highest since mid-2015, as political tensions in the Middle East escalated after a sweeping anti-corruption purge in top crude exporter Saudi Arabia, which in turn has confronted Iran over the conflict in Yemen.

China’s October oil imports fell to just 7.3 million barrels per day from a near record-high of about 9 million bpd in September, according to data from the General Administration of Customs on Wednesday. That is the lowest level since October 2016, though imports were up 7.8 percent from a year ago.

Li Yan, oil analyst with Zibo Longzhong Information Group, said the lower imports reflected fewer purchases from independent refineries, “as many of them are running out of crude quotas for this year.”

Here's what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup

Here’s what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup  

For next year, however, independent refiners are likely to boost their imports again as authorities on Wednesday raised the 2018 crude oil import quota by 55 percent over 2017 to 2.85 million bpd.

The oil price has gained around 14 percent in the last month alone, propelled largely by evidence that OPEC’s efforts, together with those of its partners to curtail output, is helping erode a global overhang of unused crude.

“Stronger oil fundamentals and investor inflows have been the catalyst for higher oil prices, but adding further support now is a focus on several geopolitical risks that have been looming over oil markets for a while,” said analysts at Citi.

The Organization of the Petroleum Exporting Countries‘ 2017 World Oil Outlook showed the group predicts demand for its crude will rise more slowly than previously expected in the next two years, as higher prices from its supply policy stimulate output growth from rival producers.

“The call on OPEC in 2019 envisaged by OPEC was reduced by 600,000 to a good 33 million bpd, and is expected to remain at roughly this level until 2025,” Commerzbank said in a note.

“Currently, OPEC is only producing somewhat less than this amount. This leaves OPEC virtually no scope to expand production in the next eight years.”

Oil near two-year high as tightening market attracts buyers

CNBC

  • OPEC to meet this month to discuss production cut pact
  • Strong demand also supports crude prices
  • Middle East producers raise prices to Asian buyers

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices rose on Friday, nearing their highest levels in more than two years, with buyers attracted by expectations of an extension to a global pact to cut output that has reduced oversupply.

Global benchmark Brent futures traded up 41 cents at $61.03 a barrel, approaching levels around $61.70 a barrel last seen in July 2015. Brent has risen around 38 percent since its low in 2017 reached in June.

U.S. West Texas Intermediate (WTI) crude traded at $54.78 a barrel, up 24 cents. WTI is around 30 percent above its 2017 low hit June.

This week’s U.S. Energy Information Agency (EIA) report on crude inventories and exports showed a large draw in U.S. stocks, showing that market is rebalancing.

“Wednesday’s EIA report was bullish so the longs took profit then but now the uptrend is reasserting itself. Roll-over of the OPEC/non-OPEC deal looks certain and is also supportive,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

crude oil production oil derrick

If crude oil passes this price, it opens the door to soar  

The Organization of the Petroleum Exporting Countries meets at the end of November to discuss further action after it agreed nearly a year ago with Russia and other producers to hold back 1.8 million barrels per day (bpd) of oil supply.

Russia said on Thursday the deal, which is due to expire in March, could be extended if necessary but that a decision was not imminent.

While supplies are being withheld, demand is also rising, especially in China, whose roughly 9 million bpd of imports have surpassed those of the United States to top the world’s crude importer list.

“China’s oil demand growth appears to be accelerating,” investment bank Jefferies said.

Physical oil prices are also rising. Saudi Aramco, the UAE’s ADNOC and Qatar Petroleum have all raised their crude prices for Asian buyers, with Aramco’s December premium over the average of the Oman and Dubai benchmarks now at the highest in three years.

Traders also eyed risks from ongoing financial troubles of OPEC-members Venezuela and its state oil company PDVSA.

The government and PDVSA owe some $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.

The next hard payment deadline for PDVSA is an $81 million bond payment that was due on Oct. 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.

Oil prices jumped about 2 percent on Friday

Oil up 2 percent, Brent hits $60 per barrel on support for extending curbs

NEW YORK (Reuters) – Oil prices jumped about 2 percent on Friday, with global benchmark Brent crude rising above $60 per barrel, on support among the world’s top producers for extending a deal to rein in output and as the dollar retreated from three-month peaks.

Saudi Arabia and Russia declared their support for extending an OPEC-led deal to cut supplies for another nine months, the Organization of the Petroleum Exporting Countries’ secretary general said ahead of the group’s next policy meeting on Nov. 30. The pact currently runs to March 2018.

Brent futures LCOc1 rose $1.14, or 1.9 percent, to settle at $60.44 a barrel after hitting a session peak of $60.53, the highest since July 2015 and more than 35 percent above 2017 lows touched in June.

U.S. West Texas Intermediate crude oil (WTI) CLc1 ended the session up $1.26, or 2.4 percent, at $53.90 after reaching a session peak of $53.98 a barrel, the highest since early March.

For the week, Brent was 4.6 percent higher, notching its third straight weekly gain. U.S. crude rose 4.7 percent for the week.

U.S. crude’s gains have lagged the global benchmark amid rising domestic output.

Oil prices have been hovering near their highest levels for this year amid signs of a tightening market, renewed support this week of an extension of production cuts and tensions in Iraq.

“What is interesting is that the pop in WTI futures moved above the Sept. 28 high,” said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington.

“So even though the dollar is giving back some of its move, crude may now be trading off of a new driver, the technical breakthrough to a new high.”

The dollar trimmed its earlier gains versus a basket of currencies .DXY following a Bloomberg report that U.S. President Donald Trump is leaning toward Federal Reserve Governor Jerome Powell as his pick to head the U.S. central bank.

A weaker dollar makes greenback-denominated commodities, including oil, cheaper for holders of other currencies.

“I think the combination of short-covering and Chevron and Exxon both missing their production guidance for the third quarter has resulted in the market strength today,” said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.

TransCanada Corp (TRP.TO) said in a filing on Thursday that it is seeking to raise the temporary discounted spot rate for light crude on its 700,000 barrel-per-day Marketlink pipeline. That sent WTI’s discount to global marker Brent WTCLc1-LCOc1 to the widest in a month.

OPEC and other major producers including Russia have pledged to reduce production by around 1.8 million barrels per day (bpd) to drain a global supply glut.

“If OPEC and their non-OPEC partners can agree to extend their production curtailments through 2018, then we estimate the oil market will remain in modest under-supply until 2019,” U.S. investment bank Jefferies said.

Rising U.S. crude production remains an issue for OPEC as it strives to clear a global supply overhang.

Government data showed that U.S. crude production rose 1.1 million bpd last week to 9.5 million bpd after a decline due to Hurricane Nate, while U.S. oil exports hit a new record four-week average of 1.7 million bpd. [EIA/S]

U.S. drillers added one oil rig in the week to Oct. 27, but the rig count, an indicator of future production, fell by 13 for the month, the biggest such decline since May 2016, data showed.

Hedge funds and other money managers raised their bullish wagers on U.S. crude futures and options in the week to October 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

“Momentum may take us a little further here but longer term, I would expect a supply response here domestically,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

“It’s a market we feel is rangebound (for U.S. crude) in the mid-$40s to mid-$50s.”

Additional reporting by Christopher Johnson, Julia Payne and Dmitry Zdhannikov in London, Jane Chung in Seoul and Henning Gloystein in Singapore; Editing by Marguerita Choy and Susan Thomas