Oil firms as Saudis trim exports and US output forecast is reduced

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Reuters

KEY POINTS
  • International Brent crude oil futures were at $66.85 a barrel at 0341 GMT, up 18 cents, or 0.3 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $57.12 per barrel, up 25 cents, or 0.5 percent, from their last settlement.
  • The higher oil prices are supported by ongoing supply cuts from producer cartel OPEC and U.S. sanctions against Iran and Venezuela.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices rose on Wednesday, pushed up by ongoing supply cuts from producer cartel OPEC and U.S. sanctions against Iran and Venezuela.

International Brent crude oil futures were at $66.85 a barrel at 0341 GMT, up 18 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $57.12 per barrel, up 25 cents, or 0.5 percent, from their last settlement.

Oil prices have been pushed up this year by supply cuts led by the Middle Eastdominated producer group of the Organization of the Petroleum Exporting Countries (OPEC).

Markets have been further tightened by the implementation of U.S. sanctions against oil exports from OPEC-members Iran and Venezuela.

In Venezuela, the worst blackout on record has left most of the South American country without power for six days, leaving hospitals struggling to keep equipment running, food rotting in the tropical heat and exports from the country’s main oil terminal stranded.

“Failures in the electrical system … (are) likely to accelerate the loss of 700,000 barrels per day” in oil supply, Barclays bank said.

Despite this, not all indicators point to an ever tighter market. National Australia Bank (NAB) said the oil market outlook was mixed, with downside price risk coming from economic growth concerns and strong oil supply growth from the United States, with OPEC’s supply cuts and U.S. sanctions against Iran and Venezuela acting as price drivers.

“On balance, we see a very gradual uptrend for oil this year, with Brent forecast to reach $70 per barrel by the end of the year,” NAB said.

U.S. crude oil production is expected to average about 12.30 million bpd in 2019, the U.S. Energy Information Administration (EIA) said on Tuesday.

That’s up from an average of around 11 million bpd in 2018.

Oil prices rise on OPEC supply cuts and healthy demand

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.97 per barrel at 0054 GMT, up 18 cents, or 0.3 percent, from their last settlement.
  • Brent crude futures were at $66.75 per barrel, up 17 cents, or 0.3 percent.
  • Bank of America Merrill Lynch said oil prices will still be supported by OPEC-led supply cuts and strong demand for marine diesel from the International Maritime Organization, despite economic headwinds this year.
Reusable CNBC: oil drilling rig West Texas 150825-Brennan
Morgan Brennan | CNBC

Oil prices rose on Tuesday, lifted by healthy demand and output cuts led by producer group OPEC.

A rally in broader financial markets also supported crude futures, although analysts still warned of risks to the global economy.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.97 per barrel at 0054 GMT, up 18 cents, or 0.3 percent, from their last settlement.

Brent crude futures were at $66.75 per barrel, up 17 cents, or 0.3 percent.

”(Despite economic headwinds), we still see Brent prices averaging $70 per barrel this year and expect WTI to lag, averaging $59 per barrel in 2019,” said Bank of America Merrill Lynch.

It said that was partly due to demand for marine diesel expected from next year as part of new fuel rules from the International Maritime Organization.

“With diesel yields already maxed out, refiners may need to lift runs in 2H19 to meet rising demand for marine distillates,” it said.

Oil prices have been receiving broad support this year from supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia aimed at tightening markets.

Traders also pointed to the political and economic crisis in OPEC-member Venezuela as a driver for oil prices.

Venezuela’s opposition-run congress on Monday declared a “state of alarm” over a five-day power blackout that has crippled the country’s oil exports and left millions of citizens scrambling to find food and water.

Surging US output

Offsetting OPEC efforts to tighten the market and disruptions like Venezuela is a surge in U.S. oil supply.

The United States will drive global oil supply growth over the next five years, adding another 4 million barrels per day (bpd) to the country’s already booming output, the International Energy Agency said on Monday.

U.S. crude oil output will rise nearly 2.8 million bpd, growing to 13.7 million bpd in 2024 from an average of just under 11 million bpd in 2018, the IEA said, making the United States by far the biggest oil producer in the world.

With U.S. production booming, the country needs to import less and is increasingly turning abroad to sell surplus oil.

“The decrease in net crude oil imports (December, 2018) was driven primarily by lower imports from Saudi Arabia (down 160,000 bpd month-on-month) and higher exports to Asian countries such as South Korea (up 200,000 bpd month-on-month), China (up 90,000 bpd month-on-month) and India(80,000 bpd month-on-month), ” Barclays bank said.

Oil rises as OPEC output cuts look set to continue while US drilling activity slumps

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.39 per barrel at 0323 GMT GMT, up 32 cents, or 0.6 percent from their last close.
  • Brent crude futures were at $65.04 per barrel, up 30 cents, or 0.5 percent.
  • This comes after Saudi oil minister Khalid al-Falih said an end to OPEC-led supply cuts was unlikely before June, while a report showed U.S. drilling activity fell for a third straight week.
Reusable: Oil pump jack leased by Devon Energy 150922
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices rose on Monday, lifted by comments from Saudi oil minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing a fall U.S. drilling activity.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.39 per barrel at 0323 GMT GMT, up 32 cents, or 0.6 percent from their last close.

Brent crude futures were at $65.04 per barrel, up 30 cents, or 0.5 percent.

Despite the gains, markets were somewhat held back after U.S. employment data raised concerns that an economic slowdown in Asia and Europe was spilling into the United States, where growth has so far still been healthy.

“Downward revisions in global growth forecasts by OECD and ECB have capped bullish gains,” said Benjamin Lu of Singapore-based brokerage Phillip Futures.

Oil markets have generally been supported this year by ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated allies like Russia — known as the OPEC+ alliance.

OPEC+ has pledged to cut 1.2 million barrels per day (bpd) in crude supply since the start of the year to tighten markets and prop up prices.

The group will meet in Vienna on April 17-18, with another gathering scheduled for June 25-26, to discuss supply policy.

Saudi oil minister Khalid al-Falih told Reuters on Sunday it would be too early to change OPEC+ output policy at the group’s meeting in April.

“We will see what happens by April, if there is any unforeseen disruption somewhere else, but barring this I think we will just be kicking the can forward,” Falih said.

Prices were also supported by U.S. energy services firm Baker Hughes’ latest weekly report showing the number of rigs drilling for new oil production in the United States fell by nine to 834.

High drilling activity last year resulted in a more than 2 million bpd rise in production, to 12.1 million bpd reached this February, making the United States the world’s biggest producer of crude oil ahead of Russia and Saudi Arabia.

The slowdown in drilling points to more timid output growth going forward, but because the overall drilling level remains relatively high despite the recent decline, many analysts still expect U.S. crude output to rise above 13 million bpd soon.

“This is the third straight week of decline…after a number of oil producers trimmed their spending outlooks for 2019,” ANZ bank said on Monday.

Brent crude oil slips away from 2019 high after China reports car sales drop

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  • China’s vehicle sales last month fell by 15.8 percent versus the same month in 2018, an industry association said on Monday. This continued the 2018 trend, in which China recorded the first annual drop in vehicle sales on record.

An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner

Getty Images
An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner

Oil prices weakened on Monday after climbing to their highest this year earlier in the session as China reported automobile sales in January fell for a seventh month, raising concerns about fuel demand in the world’s second-largest oil user.

International Brent crude futures were at $66.20 per barrel at 0353 GMT, down 5 cents from their last close. Brent earlier climbed to $66.78 a barrel, the highest since November 2018.

U.S. West Texas Intermediate (WTI) crude oil futures were at $55.82 per barrel, up 23 cents from their last close. WTI prices also rose their highest since November, at $56.13 per barrel, earlier on Monday.

Traders said Brent prices slipped after China reported the weak car sales data.

China’s vehicle sales last month fell by 15.8 percent versus the same month in 2018, an industry association said on Monday. This continued the 2018 trend, in which China recorded the first annual drop in vehicle sales on record.

So-called new energy vehicle sales in January, which include electric vehicles, registered a 140 percent increase, underscoring expectations that oil demand from cars may peak in China in the coming years.

Despite this data, global oil markets remain relatively tight because of supply cuts organised by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers like Russia. The group of producer countries agreed late last year to cut output by 1.2 million barrels per day (bpd) to prevent a large supply overhang from swelling.

Further supporting crude prices have been U.S. sanctions against oil exporters and OPEC-members Iran and Venezuela.

Traders said financial markets, including crude futures, were also generally supported by hopes that the United States and China would soon resolve their trade disputes, which have dragged on global economic growth.

“Positive signs in the U.S.-China trade talks helped boost sentiment across markets,” ANZ bank said on Monday.

At least partly offsetting the supply cuts has been a surge in U.S. crude oil production by more than 2 million bpd in 2018, to a record 11.9 million bpd.

And there are signs that U.S. output will rise further.

U.S. energy firms last week increased the number of oil rigs looking for new supply by three, to a total of 857, energy services firm Baker Hughes said in a weekly report last Friday.

That means the U.S. rig count is higher than a year ago when fewer than 800 rigs were active.

— CNBC contributed to this report.

Oil slips on rising US rig count, China industrial slowdown

CNBC

  • Both Brent and U.S. crude futures slipped.
  • U.S. energy firms last week raised the number of rigs looking for new oil for the first time in 2019 to 862, an additional 10 rigs, Baker Hughes energy services firm said in its weekly report on Friday.
  • Beyond oil supply, a key question for this year will be demand growth, with concerns over a slowing economy in China. the world’s second-largest oil user.

Oil refinery and storage Australia

Jason Reed | Reuters

Oil prices fell on Monday after U.S. energy firms added rigs for the first time this year in a sign that crude production there may rise further, and as China, the world’s second-largest oil user, reported additional signs of an economic slowdown.

U.S. crude oil futures were at $53.43 per barrel at 0253 GMT, down 26 cents, or 0.5 percent, from their last settlement.

International Brent crude oil futures were at $61.50 a barrel, down 14 cents, or 0.2 percent.

High U.S. crude oil production, which rose to a record 11.9 million barrels per day (bpd) late last year, has been weighing on oil markets, traders said.

In a sign that output could rise further, U.S. energy firms last week raised the number of rigs looking for new oil for the first time in 2019 to 862, an additional 10 rigs, Baker Hughes energy services firm said in its weekly report on Friday.

Beyond oil supply, a key question for this year will be demand growth.

Oil consumption has been increasing steadily, likely averaging above 100 million bpd for the first time ever in 2019, driven largely by a boom in China.

However, an economic slowdown amid a trade dispute between Washington and Beijing is weighing on fuel demand-growth expectations.

Earnings at China’s industrial firms shrank for a second straight month in December on falling prices and sluggish factory activity, piling more pressure on the world’s second-largest economy, which reported the slowest pace of growth last year since 1990.

China is trying to stem the slowdown with aggressive fiscal stimulus measures.

But there are concerns that these measures may not have the desired effect as China’s economy is already laden with massive debt and some of the bigger government spending measures may be of little real use.

The increased U.S. supply, the country is now the world’s largest producer, and the economic slowdown are weighing on the oil price outlook.

“We expect U.S. crude oil prices to range between $50-$60 per barrel in 2019 and about $10 more per barrel for Brent,” Tortoise Capital Advisors said in its 2019 oil market outlook.

However, Tortoise added that oil prices would be supported above $50 per barrel as it was “very clear that Saudi Arabia will no longer be willing to accept these lower oil prices”.

The Organization of the Petroleum Exporting Countries (OPEC), de-facto led by Saudi Arabia, started supply cuts late last year to tighten markets and buoy prices.