Brent drops by 2 percent as traders expect output rise after OPEC deal

CNBC

  • Global benchmark Brent fell by more than 2 percent in early trade on Monday.
  • That followed an expected output increase that was agreed at OPEC’s headquarters in Vienna on Friday.
  • Brent futures were down 2.2 percent at $73.9 at 0035 GMT, from their last close.

Brent crude oil prices fell by more than 2 percent early on Monday as traders factored in an expected output increase that was agreed at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna on Friday.

Brent crude futures , the international benchmark for oil prices, were at $73.90 per barrel at 0035 GMT, down 2.2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $68.36 a barrel, down 0.3 percent, supported by a slight drop in U.S. drilling activity.

Prices initially jumped after the deal was announced as it was not seen boosting supply by as much as some had expected.

OPEC and non-OPEC partners including Russia have since 2017 cut output by 1.8 million barrels per day (bpd) to tighten the market and prop up prices.

Largely because of unplanned disruptions in places like Venezuela and Angola, the group’s output has been below the targeted cuts, which it now says will be reversed by supply rises especially from OPEC leader Saudi Arabia.

Britain’s Barclays bank said OPEC’s and Russia’s commitments would take “the market from a -0.2 million bpd deficit in H2 2018 to a 0.2 million bpd surplus”.

Energy consultancy Wood Mackenzie said the agreement “represents a compromise between responding to consumer pressure and the need for oil-producing countries to maintain oil prices and prevent harming their economies”.

In the United States, U.S. energy companies last week cut one oil rig, the first reduction in 12 weeks, taking the total rig count to 862, Baker Hughes said on Friday.

That put the rig count on track for its smallest monthly gain since declining by two rigs in March with just three rigs added so far in June, although the overall level remains just one rig short of the March 2015 high from the previous week.

Oil prices rise on ongoing Venezuelan supply trouble

CNBC

  • Oil prices rose on Friday, driven up as Venezuela struggles to meet its supply obligations.
  • One of the key features of oil markets recently has been the widening discount of U.S. WTI crude versus Brent.
  • Brent has been pushed up by production cuts led by OPEC and Russia.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices rose on Friday, driven up as Venezuela struggles to meet its supply obligations and by ongoing voluntary output cuts led by producer cartel OPEC.

Brent crude futures, the international benchmark for oil prices, were at $77.45 per barrel at 0051 GMT, up 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 19 cents, or 0.3 percent, at $66.14 a barrel.

Prices were pushed up by supply trouble in Venezuela, where state-owned oil firm PDVSA is struggling to clear a backlog of around 24 million barrels of crude waiting to be shipped to customers.

Out of sync

Despite this, oil markets are not unanimously bullish.

One of the key features of oil markets recently has been the widening discount of U.S. WTI crude versus Brent, which has almost quadrupled since February to $11.40 per barrel, its steepest discount since 2015.

“This is occurring because of the rapid increase in production from U.S.shale coupled with the tightening of supplies elsewhere through the actions of OPEC and Russia,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Brent has been pushed up by voluntary production cuts led by the Middle East dominated producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) and by top producer Russia, which were put in place in 2017.

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The group and Russia are due to meet at its headquarters in Vienna on June 22 to discuss production policy.

Looming new U.S. sanctions against major oil exporter Iran have further tightened international oil markets.

In North America, however, surging U.S. output has pressured WTI crude futures.

U.S. crude oil production hit another record last week at 10.8 million barrels per day (bpd).

That’s a 28 percent gain in two years, or an average 2.3 percent growth rate per month since mid-2016 and puts the United States close to becoming the world’s biggest crude oil producer, edging nearer to the 11 million bpd churned out by Russia.

Crude oil prices ease on prospects of higher world supplies

CNBC

  • Crude oil futures lost more ground on Monday.
  • Prices came under pressure from record U.S. output and expectations of higher OPEC supplies.

Oil

Lucy Nicholson | Reuters

Crude oil futures lost more ground on Monday as the market was weighed down by U.S. output climbing to a record-high and expectations that OPEC members will raise supplies.

Global benchmark Brent was down 34 cents, or 0.4 percent, at $76.45 a barrel by 0531 GMT, falling for a second session.

U.S. West Texas Intermediate (WTI) crude futures dipped 3 cents to $65.78 a barrel. Last week, the market lost around 3 percent, adding to a near 5-percent decline from a week before.

“Crude oil remained under pressure as the market remained focused on the discussion between OPEC members about whether they should increase production later this year,” ANZ said in a note.

“In the U.S., the data also presented a gloomy picture. Crude oil production rose to another record, while drilling activity picked up again.”

“We are going into summer, the high demand season, and I think we are going to see a fall in U.S. crude oil inventories, but shale oil output is growing. Which one is going to win is the issue,” said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.

Saudi Arabia, effective leader of the Organization of the Petroleum Exporting Countries (OPEC), and Russia have discussed boosting output to compensate for supply losses from Venezuela and to address concerns about the impact of U.S. sanctions on Iranian output.

Oil market is doing something it hasn't done in 3 years — and it's bullish for crude

Oil market is doing something it hasn’t done in 3 years — and it’s bullish for crude  

Russia’s largest oil producer Rosneft will be able to restore 70,000 barrels per day (bpd) of oil output in just two days if global production limits are lifted, Renaissance Capital wrote in a client note.

U.S. crude production climbed in March to 10.47 million barrels per day (bpd), a monthly record, the Energy Information Administration said on Thursday.

U.S. drillers added two oil rigs in the week to June 1, bringing the total to 861, the most since March 2015, General Electric’s Baker Hughes energy services firm said on Friday. That was the eighth time drillers have added rigs in the past nine weeks.

Hedge funds and other money managers cut their bullish wagers on U.S. crude futures and options, according to data released on Friday, as oil prices slumped on oversupply fears.

The speculator group cut its combined futures and options position in New York and London by 50,937 contracts to 370,980 during the week to May 29, the U.S. Commodity Futures Trading Commission said.

Oil dips after rally, OPEC may ease supply curbs

CNBC

  • Oil prices edged lower on Wednesday.
  • Markets took a breather on expectations OPEC may raise supplies as early as June.
  • Concerns about a potential drop in Iranian oil exports following Washington’s exit from the Iran nuclear deal remained.

Oil jack pumps in the Kern River oil field in Bakersfield, California.

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

Oil prices edged lower on Wednesday as the market took a breather on expectations OPEC may raise supplies as early as June, although geopolitical risks kept a floor under the market.

Brent futures dipped 4 cents to $79.53 a barrel by 0006 GMT, after climbing 35 cents on Tuesday. Last week, the global benchmark hit $80.50 a barrel, the highest since November 2014.

U.S. West Texas Intermediate (WTI) crude futures eased 2 cents to $72.18 a barrel, having climbed on Tuesday to $72.83 a barrel, the highest since November 2014.

“Geopolitical risks … kept investors on their toes. U.S. Secretary of State Pompeo demanded that Iran halt all uranium enrichment and give nuclear inspectors access to the entire country,” ANZ said in a note.

“However, investors are mindful of upcoming talks between Russia and Saudi Arabia about whether they should look at a controlled relaxation of over-compliance with their output cut agreement.”

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources familiar with the discussions told Reuters.

The OPEC-led supply curbs have largely cleared an inventory surplus in industrialized countries based on the deal’s original goals, and stocks continue to decline.

Rising supply in the United States, where shale production is forecast to hit a record high in June, has limited the upward move in prices.

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Concerns about a potential drop in Iranian oil exports following Washington’s exit from a nuclear arms control deal with Tehran have driven prices to multi-year highs.

On Monday, the United States demanded Iran make sweeping changes – from dropping its nuclear program to pulling out of the Syrian civil war – or face severe economic sanctions.

Iran dismissed Washington’s ultimatum and one senior Iranian official said it showed the United States is seeking “regime change” in Iran.

U.S. crude and distillate stockpiles fell last week, while gasoline inventories increased unexpectedly, data from industry group the American Petroleum Institute showed on Tuesday.

Oil logs strongest weekly performance in over 8 months

MarketWatch

Monthly IEA report, Syria tensions lift oil

Reuters

By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Crude-oil prices rose for a fifth straight session Friday, with U.S. benchmark crude tallying a gain of nearly 9% for the week, driven by fears of a U.S.-led military conflict in Syria.

A report from the International Energy Agency on Friday also indicated that OPEC soon will have succeeded in reaching its target for reducing the global supply glut.

May West Texas Intermediate crude CLK8, +0.48%  tacked on 32 cents, or 0.5%, to settle at $67.39 a barrel on the New York Mercantile Exchange. For the week, the U.S. oil benchmark rallied by roughly 8.6%, which was the strongest weekly percentage performance since late July of last year.

June Brent LCOM8, +0.83% added 56 cents, or 0.8%, to $72.58 a barrel on ICE Futures Europe. For the week, in the international benchmark was up about 8.2%.

On Friday, the IEA indicated that global oil stockpiles are dwindling and approaching the five-year average the Organization of the Petroleum Exporting Countries is targeting.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its report.

The Vienna agreement refers to the group of OPEC and non-OPEC countries that in 2016 agreed to cut output in an effort to reduce a global supply glut that had dragged oil prices substantially lower. The IEA report echoes the monthly data from OPEC earlier this week, which showed the group’s output declined by 201,000 in March and that the supply surplus is evaporating.

The IEA also noted that the continuing U.S.-China trade spat could dent oil demand.

Longer term, “we are bullish on oil prices as continued global economic growth drives demand higher by approximately 1.5% per year,” said Jay Hatfield, chief executive officer and founder of InfraCap. Global supply also “remains constrained by declines in Venezuela production, flat to declining production in offshore areas such as the North Sea, offset by steady growth in U.S. production of approximately 1 million barrels per day.”

Hatfield expects WTI to trade in the $60-70 range this year and $70-80 in 2019, “with more risk to the upside.”

Read: Here’s why Credit Suisse just boosted its oil price forecast by 18%

In the U.S., Baker Hughes BHGE, +1.37%  on Friday reported that the number of active domestic oil rigs edged up by 7 this week. The figure, which offers a peek at U.S. oil activity, was up a second straight week.

Still, market participants said crude futures have come under pressure amid fears that Russia may retaliate against the U.S. by imposing sanctions in response to sanctions levied against Moscow last week in response to what the U.S. said was attempts to subvert Western democracies, and malicious cyber activities.

“This news offset good news about the ratcheted down of trade tensions with China and the possibility the U.S. could be re-entering the [Trans-Pacific Partnership],” said Phil Flynn, senior market analyst at Price Futures Group, in a note.

The fear is that sanctions from Russia could hurt demand and push prices lower, he explained.

More broadly, the stellar weekly performances for both WTI and Brent this week come as geopolitical tensions have returned to the fore after a suspected chemical-weapons attack in Syria that killed civilians over the weekend. That matter is also complicated by Syria’s friendly ties with Russia, Iran and Turkey.

U.S. President Donald Trump on Wednesday warned Russia that he was ready to launch an imminent military attack on Syria, but toned down his rhetoric on Thursday.

Among energy products, gasoline RBK8, +0.34%  settled 0.5% higher at $2.065 a gallon, for a 5.7% gain on the week. May heating oil HOK8, +0.87% added 0.8% to $2.10 a gallon—up about 7.3% for the week.

May natural gas NGK18, +1.86%  rose 1.8% to $2.735 per million British thermal units, for a weekly rise of 1.3%.