Oil dips on US stocks build, production outlook

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Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Chevron Corp and Exxon Mobil Corp released dueling Permian Basin projections on Tuesday pointing to big increases in shale oil production.
  • Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.
  • The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries.
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 slipped on Wednesday as bullish output forecasts by two big U.S. producers and a build in weekly U.S. crude stockpiles outweighed ongoing OPEC-led production cuts.

International Brent crude futures were at $65.36 per barrel at 0440 GMT, down 50 cents, or 0.8 percent, from their last settlement.

U.S. West Texas Intermediate (WTI) crude oil futures were also down 0.8 percent, or 45 cents, at $56.11 per barrel.

“Crude oil futures continue to demonstrate whippy trades as markets balance between OPEC-led cuts and the effects of rising U.S. production levels,” said Benjamin Lu, commodities analyst at Singapore-based brokerage firm Phillip Futures.

Increasingly event-driven trading was adding to market volatility, he added.

Chevron Corp and Exxon Mobil Corp released rival Permian Basin projections on Tuesday pointing to increased shale oil production.

If realized, the increases would cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.

Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.

U.S. crude inventories rose by 7.3 million barrels in the week ending March 1 to 451.5 million, compared with analysts’ expectations for an increase of 1.2 million barrels, API said. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels.

“An increase in U.S. crude inventories is weighing on oil prices and in the long term, concerns over rising oil production in the Permian region is keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

Official data from the U.S. Department of Energy’s Energy Information Administration is due later on Wednesday.

The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries (OPEC).

OPEC and its allies pledged to curb output by 1.2 million barrels per day, and they are likely to push back their decision whether or not to extend the output cut agreement to June from April, according to sources.

Meanwhile, the market is looking for further signs that the United States and China are making progress in talks to resolve their trade conflict.

U.S. Secretary of State Mike Pompeo said President Donald Trump would reject any trade deal that is not perfect, but added the White House would keep working on an agreement.

Oil markets cautious as another tropical storm heads for Gulf of Mexico

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  • U.S. crude futures were trading at $50.73 per barrel, down 6 cents from their last close
  • Brent crude futures were down 6 cents at $56.94 a barrel
  • Tropical storm Nate is threatening to disrupt the oil industry in the Gulf of Mexico

An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Spencer Platt | Getty Images
An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Oil markets opened cautiously in Asia on Friday as traders monitored a tropical storm heading for the Gulf of Mexico and as China remained closed for a week-long public holiday.

But the prospect of extended oil production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) helped support prices.

U.S. West Texas Intermediate (WTI) crude futures were trading at $50.73 per barrel at 0016 GMT, down 6 cents from their last close.

Brent crude futures, the international benchmark for oil prices, were down 6 cents at $56.94 a barrel.

Oil market activity was subdued on Friday, due to the ongoing Golden Week holiday in China and because traders were monitoring tropical storm Nate, which is threatening to disrupt the oil industry in the Gulf of Mexico just weeks after several hurricanes pummelled the region, knocking out many oil producing and processing facilities.

The Louisiana Offshore Oil Port (LOOP), one of the country’s most important fuel handling facilities in the Gulf of Mexico, said early on Friday that it had suspended operations until the weather improves.

Nate is currently off the coast of Nicaragua and heading northwest into a region of the Gulf of Mexico populated by offshore oil platforms which pump more than 1.6 million barrels of crude per day (bpd), about 17 percent of U.S. output, according to government data.

BP and Chevron were shutting production at all Gulf platforms, while Royal Dutch Shell and Anadarko Petroleum suspended some production and drilling activity in the Gulf. Exxon Mobil, Statoil and other producers have withdrawn personnel from their platforms.

Despite this, markets were not far off their closing levels from the previous day, when prices rose by around 2 percent on the prospect of an extended production cut deal lead by OPEC and Russia.

King Salman of Saudi Arabia, OPEC’s de-facto leaders, met with Russian President Vladimir Putin in Moscow on Thursday to discuss, among other things, oil policy.

Saudi Arabia made no firm pledge to extend a deal between OPEC, Russia and other producers on cutting supplies but said it was “flexible” regarding Moscow’s suggestion to prolong the pact until the end of 2018.

“The visit raised the possibility of the current production cut agreement being extended if the crude oil inventories remain stubbornly high,” ANZ bank said.

A deal to cut around 1.8 million bpd in production has been in place since January and is currently due to expire at the end of March 2018.