Oil prices edge up after nearly 8-percent ‘Black Friday’ plunge

CNBC

  • Brent remains below $60 per barrel after an almost 8-percent drop last Friday.
  • The downward pressure comes from surging supply and a slowdown in demand-growth which is expected to result in an oil supply overhang in 2019.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices won back some ground after hefty losses on Friday, but remained under pressure with Brent crude below $60 per barrel amid weak fundamentals and struggling financial markets.

Front-month Brent crude oil futures were at $59.20 per barrel at 0049 GMT, up 40 cents, or 0.7 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures, were up 16 cents, or 0.3 percent, at $50.58 per barrel.

But Monday’s gains did little to make up for the almost 8-percent plunge on Friday, which traders have already dubbed ‘Black Friday’.

Greg McKenna, an independent financial analyst from Australia said there had been an “utter capitulation in crude oil” markets.

The downward pressure comes from surging supply and a slowdown in demand-growth which is expected to result in an oil supply overhang in 2019.

Wider downturn

Beyond weak fundamentals, oil markets are also being impacted by a downturn in wider financial markets.

“2018 clearly marked the end of the 10-year Asia credit bull market due to tightening financial conditions in Asia (especially China), and we expect this to remain the case in 2019,” Morgan Stanley said in a note released on Sunday.

“We don’t think that we are at the bottom of the cycle yet,” the U.S. bank said.

Oil markets have also been weighed down by the strong U.S.-dollar, which has surged against most other currencies this year, thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil, which are seen as more risky than the greenback.

“Anything denominated against the USD is under pressure right now, said McKenna.

Another risk to global trade and overall economic growth is the trade war between the world’s two biggest economies, the United States and China.

“The U.S.-China trade conflict poses a downside risk as we forecast the U.S. to impose 25 percent tariffs on all China imports by Q1 2019,” U.S. bank J.P. Morgan said in a note published on Friday.

Oil prices fall into bear market on rising supply, economic concerns

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  • Both Brent and WTI have declined by around 20 percent since seeing four-year highs in early October.
  • One Reuters analyst said Brent could “slip further into a range of $68.59-$69.69 per barrel.”

Oil markets on Friday remained weak as rising supply and concerns of an economic slowdown pressured prices, with U.S. crude now down by around 20 percent since early October.

U.S. West Texas Intermediate (WTI) crude oil futures were at $65.60 per barrel at 0509 GMT, down 4 cents, or 0.1 percent from their last settlement. WTI is set to fall for a fifth week, down 4.1 percent so far this week.

Front-month Brent crude oil futures were at $70.69 a barrel, 4 cents above their last close. Brent is set for a 2.9 percent drop for the week, its fifth straight week of declines.

Both Brent and WTI have declined by around 20 percent from the four-year highs they reached in early October.

“Oil prices continue to decline and are now officially in a bear market, having declined 20 percent from their (October) peak,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Reuters technical commodity analyst Wang Tao said on Friday that “Brent oil may slide further into a range of $68.59-$69.69 per barrel.”

That would be the first time Brent has fallen below $70 since April.

Analysts said the main downward price pressure came from rising supply, despite the U.S. sanctions against Iran that were imposed this week, as well as concerns over an economic slowdown.

“As OPEC exports continue to rise, inventories continue to build which is putting downward pressure on oil prices,” analysts at Bernstein Energy said.

“A slowdown in the global economy remains the key downside risk to oil,” Bernstein added.

The decline in prices over the past weeks follows a rally between August and October when crude rose ahead of the re-introduction of sanctions against Iran’s oil exports on Nov. 5.

The sanctions, however, are unlikely to cut as much oil out of the market as initially expected as Washington has granted exemptions to Iran’s biggest buyers which will allow them to continue buying limited amounts of crude for at least another six months.

China National Petroleum Corp (CNPC) said on Friday it was continuing to take oil from Iranian oilfields in which it has ownership stakes.

“Our main cooperation with Iran is upstream investment. Lifting equity oil is recouping our investment there,” Hou Qijun, deputy general manager for CNPC, said on the sidelines of an industry event in Shanghai.

Bernstein Energy expects “Iranian exports will average 1.4-1.5 million barrels per day (bpd)” during the exemption period,” down from a peak of almost 3 million bpd in mid-2018.

Oil prices fall on signs of rising supplies, ebbing confidence on global economy

CNBC

  • Oil prices declined early on Thursday.
  • The fall in oil prices came on the back of large losses in October for both Brent and WTI.

Oil prices fell early on Thursday, extending losses in previous sessions, amid signs of rising supply and growing concerns that demand might weaken on the prospect of a global economic slowdown.

The Brent crude January futures contract lost 44 cents, or 0.32 percent, to trade at $74.72 per barrel by GMT 0054 GMT. West Texas Intermediate (WTI) crude futures fell 46 cents to $65.01 a barrel.

Both benchmarks posted their worst monthly performance since July 2016 on Wednesday, with Brent falling 8.8 percent for the month and WTI dropping 10.9 percent.

Thursday’s drops came after U.S. Energy Information Administration data showed crude oil inventories climbed for a sixth straight week.

“The strong built in oil inventories is likely to keep downward pressure on oil prices,” ANZ Research analysts said in a note.

Meanwhile a Reuters survey found the Organization of the Petroleum Exporting Countries (OPEC) boosted oil production in October to its highest since 2016, as higher output led by the United Arab Emirates and Libya more than offset a cut in Iranian shipments due to U.S. sanctions, set to start on Nov. 4.

U.S. President Donald Trump said on Wednesday in a presidential memorandum that he had determined there was sufficient supply of petroleum and petroleum products from nations other than Iran to permit a reduction in purchases from that country.

Also weighing on prices is growing concerns over the prospect of a global slowdown amid the ongoing U.S-China trade war, said Bruce Xue, an analyst with Huatai Great Wall Capital Management.

“Oil investors are now betting on the potential of global slowdown,” Xue said.

China delivered disappointing PMI data, with its manufacturing sector in October expanding at its weakest pace in over two years.

Oil prices edge up amid uncertainty over fallout from Iran sanctions 

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  • Markets attempted to ascertain the potential impact of U.S. sanctions on Iran which are due to go into effect on Nov. 4.
  • Iran is the third-largest producer in the Organization of Petroleum Exporting Countries.

Oil prices inched up on Friday, with investors trying to gauge the potential impact on supply from looming U.S. sanctions on Iran’s crude exports.

The most-active Brent crude futures contract, for December, had risen 18 cents, or 0.22 percent, to $81.56 per barrel by 0126 GMT. That was close to a four-year high of $82.55 struck on Tuesday.

With the expiration of the Brent November futures contract later on Friday, the front-month contract will become the December contract.

U.S futures were up 21 cents, or 0.29 percent, at $72.33 per barrel, on track for a weekly gain.

“The market has been focusing on trading headlines on the Iran sanctions for a whole week. But views on how much OPEC and Russia can make up for the losses vary,” said Chen Kai, head of commodity research at Shenda Futures.

The sanctions kick in on Nov. 4, with Washington asking buyers of Iranian oil to cut imports to zero to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

Saudi Arabia is expected to quietly add extra oil to the market over the next couple of months to offset the drop in Iranian production, but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude.

Two sources familiar with OPEC policy said Saudi Arabia and other producers discussed a possible production increase of about 500,000 barrels per day (bpd) among the Organization of the Petroleum Exporting Countries and non-OPEC allies.

However, ANZ said in a note on Friday that major suppliers were unlikely to offset losses due to the sanctions estimated at 1.5 million bpd.

At its 2018-peak in May, Iran exported 2.71 million bpd, nearly 3 percent of daily global crude consumption. The nation is OPEC’s third-largest producer.

Meanwhile, looming supply from the United States and stable output from Libya were dragging on oil prices, said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

Oil prices climb amid fall in US stockpiles, supply worries

CNBC

  • Oil prices rose for a third day on Thursday following another drawdown in U.S. inventories and strong U.S. gasoline demand.
  • U.S. crude oil stockpiles fell for a fifth straight week to 3.5-year lows in the week to Sept. 14, while gasoline inventories also showed a larger-than-expected draw on unseasonably strong demand, the Energy Information Administration said on Wednesday.

Oil rose for a third day on Thursday amid another drawdown in U.S. inventories and strong U.S. gasoline demand, while signs OPEC may not raise output to address shrinking supplies from Iran also supported prices.

Global benchmark Brent crude was up by 26 cents, or 0.3 percent, at $79.66 by 0611 GMT, after gaining half-a-percent on Wednesday.

U.S. West Texas Intermediate crude was up 60 cents, or 0.8 percent, at $71.72 a barrel, after rising nearly 2 percent the previous session.

U.S. crude oil stockpiles fell for a fifth straight week to 3.5-year lows in the week to Sept. 14, while gasoline inventories also showed a larger-than-expected draw on unseasonably strong demand, the Energy Information Administration said on Wednesday.

Crude inventories declined by 2.1 million barrels, the EIA data showed, compared with expectations for a decrease of 2.7 million barrels.

“The bulls are back in charge, even more so after traders were conveying a high degree of resistance to the unexpected build on the API survey,” said Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore.

He was referring to the weekly survey from the oil industry group the American Petroleum Institute (API) on Tuesday that indicated U.S. stocks had risen by 1.2 million barrels last week.

U.S. sanctions affecting Iran’s oil exports come into force on Nov. 4 and many buyers have already scaled back Iranian purchases. But it is unclear how easily other producers can compensate for any lost supply.

The Organization of the Petroleum Exporting Countries and other producers including Russia meet on Sunday in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply.

“The current market betting line suggests price levels rather than global supply levels will be the key determinant on turning on the oil taps,” Innes said.

OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase.