Oil prices hover close to 2019 highs on OPEC output cuts, U.S. sanctions

REUTERS

U.S. sanctions against oil producers Iran and Venezuela are also boosting prices, although traders said the market may be capped by rising U.S. output.

U.S. West Texas Intermediate (WTI) futures were at $59.14 per barrel at 0746 GMT, up 5 cents from their last settlement and close to the 2019 high of $59.23 reached the previous day.

Brent crude oil futures were up 20 cents at $67.74 per barrel, also close to this year’s peak of $68.14 marked late last week.

In China, Shanghai crude futures, launched in March last year, bounced 4.5 percent from their last close to 468.2 yuan ($69.71) per barrel, also near 2019 highs of 475.7 yuan a barrel hit during a brief spike in February.

In dollar-terms, this pushed Shanghai crude into a premium over Brent.

The Organization of the Petroleum Exporting Countries (OPEC) on Monday scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.

OPEC and a group of non-affiliated producers including Russia, known as OPEC+, started withholding supply to halt a sharp price drop in the second-half of 2018, when markets came under pressure from surging output as well as an economic slowdown.

“The OPEC+ deal has brought stability to crude prices and signs of an extension have taken crude higher,” said Alfonso Esparza, senior market analyst at futures brokerage OANDA.

Prices have been further supported by U.S. sanctions against oil exports from Iran and Venezuela, traders said.

Because of the tighter supply outlook for the coming months, the Brent forward curve has gone into backwardation since the start of the year, meaning that prices for immediate delivery are more expensive than those for dispatch further in the future, with May Brent prices currently around $1.20 per barrel more expensive than December delivery Brent.

Outside OPEC, analysts are eyeing U.S. crude oil production, which has soared by more than 2 million barrels per day (bpd) since early 2018, to around 12 million bpd, making the United States the world’s biggest producer ahead of Russia and Saudi Arabia.

Weekly output and storage data will be published by the Energy Information Administration (EIA) on Wednesday.

On the demand-side, there is concern that an economic slowdown will erode oil consumption.

Bank of America Merrill Lynch said in a note that economic “risks are skewed to the downside” and that “we forecast global demand growth of 1.2 million bpd year-on-year in 2019 and 1.15 million bpd during 2020”.

The bank said it expected “Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.”

Reporting by Henning Gloystein; Editing by Richard Pullin and Joseph Radford

Oil prices firm as supply deficit emerges amid disruptions

CNBC

Reuters

KEY POINTS
  • Brent crude oil futures were at $67.27 per barrel at 0425 GMT, 4 cents above their last close, and within a dollar of the $68.14 2019-high reached the previous day.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $58.63 per barrel, 2 cents above their last settlement, and not far off their 2019-high of $58.74 from the previous day.
  • Despite Friday’s dips, oil has rallied around a quarter since the start of the year.
Reusable: Oil pump jack and pipes California
A pump jack and pipes at an oil field near Bakersfield, California.
Lucy Nicholson | Reuters

Oil prices were firm on Friday amid production cuts led by OPEC and as U.S.sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019.

But oil prices have been capped by concerns that an economic slowdown will soon start denting growth in fuel demand.

Brent crude oil futures were at $67.27 per barrel at 0425 GMT, 4 cents above their last close, and within a dollar of the $68.14 2019-high reached the previous day.

U.S. West Texas Intermediate (WTI) crude oil futures were at $58.63 per barrel, 2 cents above their last settlement, and not far off their 2019-high of $58.74 from the previous day.

Despite Friday’s dips, oil has rallied around a quarter since the start of the year.

“Crude oil continues to grind higher…in response to ongoing production cuts from the OPEC+ group of producers as well as another (output) slump from a blacked-out Venezuela,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia — known as the OPEC+ alliance — pledged to withhold 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices.

OPEC+ will meet in Baku, Azerbaijan, over the weekend to review its output policy, although most expect the cuts to continue for now.

“We don’t think anything will be agreed this weekend. But, we suspect the group will make noise about the ongoing effort to keep this market in balance,” ANZ bank said on Friday.

Meanwhile, U.S. sanctions against Venezuela as well as Iran have further tightened oil markets.

With OPEC voluntarily withholding supply and U.S. sanctions preventing Iranian and Venezuelan oil from entering markets, global crude flow data in Refinitiv showed a slight supply deficit likely appeared in the first quarter.

Will demand hold up?

Preventing oil from rising further have been concerns that a economic slowdown that has gripped large parts of Asia and Europe, and which is showing signs of spilling into North America, will soon dent fuel demand growth.

But oil demand has held up well so far.

Crude oil use in China, the world’s biggest importer, in the first two months of 2019 rose 6.1 percent from a year earlier to a record 12.68 million bpd, official data showed this week.

“Oil demand concerns are overdone,” Goldman Sachs said in a note on Friday.

The U.S. bank said January global crude oil demand growth was “nearly 2.0 million barrels per day, with strength visible in both emerging markets and developed economies”.

Goldman said “current fundamentals will tighten physical markets further”, driving up spot Brent crude futures above $70 per barrel “as supply losses continue (and) demand growth beats low consensus expectations”.

Oil prices slide on economic slowdown, surging US supply

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.32 per barrel, down 34 cents, or 0.6 percent, from their last settlement.
  • Brent crude oil futures were at $65.83 per barrel at 0358 GMT, down 47 cents, or 0.7 percent from their last close.
  • Financial markets, including crude oil futures, took a hit after ECB President Mario Draghi said on Thursday the economy was in “a period of continued weakness and pervasive uncertainty”.
  • China’s February dollar-denominated exports fell 21 percent from a year earlier, coming in far worse than analysts’ expectations, while imports dropped 5.2 percent, official data showed on Friday.
Reusable: Oil well pump jack Permian Basin Texas
An oil well owned an operated by Apache Corporation in the Permian Basin is shown in Garden City, Texas, Feb. 5, 2015.
Getty Images

Oil prices fell on Friday amid growing investor jitters over the global economy, after the European Central Bank (ECB) warned overnight of continued weakness and as fresh data showed Chinese exports and imports slumped last month.

With surging U.S. supply also unsettling markets, international benchmark Brent crude oil futures were at $65.83 per barrel at 0358 GMT, down 47 cents, or 0.7 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.32 per barrel, down 34 cents, or 0.6 percent, from their last settlement.

Financial markets, including crude oil futures, took a hit after ECB President Mario Draghi said on Thursday the economy was in “a period of continued weakness and pervasive uncertainty”. Europe’s economic weakness comes as growth in Asia is also slowing down.

A slowdown in economic growth would also likely result in stalling fuel demand, putting pressure prices.

China’s February dollar-denominated exports fell 21 percent from a year earlier, coming in far worse than analysts’ expectations, while imports dropped 5.2 percent, official data showed on Friday.

On the supply side, prices have been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC). Together with some non-affiliated producers like Russia, the producer group has pledged to withhold around 1.2 million barrels per day (bpd) of supply to tighten markets and prop up prices.

But these efforts are being undermined by soaring U.S. crude oil production, which has increased by more than 2 million bpd since early 2018, to an unprecedented 12.1 million bpd. That makes America the world’s biggest producer, ahead of Russia and Saudi Arabia.

US to become top oil exporter?

As a result, U.S. crude exports have also been chasing new records, reaching 3.6 million bpd in February – more than OPEC members like the United Arab Emirates, Kuwait or Iran produce.

Some analysts even expect the United States to soon overtake Saudi Arabia as the world’s biggest oil exporter.

“In a pivotal geopolitical shift, the United States will soon export more oil and liquids than Saudi Arabia,” consultancy Rystad Energy said this week. Liquids include non-crude oil products like natural gas liquids (NGLs).

“The (Saudi) kingdom currently exports some 7 million bpd of crude oil plus about 2 million bpd of NGLs and petroleum products, compared with the U.S. now exporting approximately 3 million bpd of crude oil and 5 million barrels of NGLs and petroleum products,” Rystad said.

The consultancy “forecasts that U.S. oil production…will grow by close to another 1 million bpd in 2019.”

Beyond added supply to global markets and likely downward pressure on crude prices, Rystad said this export surge would have huge benefits for the U.S. economy.

“The U.S. trade deficit will evaporate, and its foreign debt will be paid quickly thanks to the swift rise of American oil and gas net exports,” said Rystad Energy senior partner Per Magnus Nysveen.

Oil slides as US crude production hits record, Asia factory output weakens

CNBC

Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures slipped.
  • Rising U.S. crude production and weakening factory output in China and Japan weighed on prices.
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 dipped on Thursday, dragged down by weakening factory output in China and Japan and record U.S. crude output, although markets remained relatively well supported by supply cuts led by producer club OPEC.

International Brent crude futures were at $66.15 per barrel at 0248 GMT, down 24 cents, or 0.4 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.92 per barrel, down 2 cents from their last settlement.

Prices were dragged down by surging American crude oil production, which has risen by more than 2 million barrels per day (bpd) over the last year, to an unprecedented 12.1 million bpd.

Traders said China’s weakening economy also weighed on oil prices.

Factory activity in China, the world’s biggest oil importer, shrank for the third straight month in February. China’s official manufacturing gauge fell to a three-year low, highlighting deepening cracks in an economy facing persistently weak demand at home and abroad.

In Japan, Asia’s second-biggest economy, factory output posted the biggest decline in a year in January as China’s slowdown affects the entire region.

Still, oil markets remain relatively well supported by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as ‘OPEC+’, agreed late last year to reduce output by 1.2 million bpd to prop up prices.

Because of these cuts, U.S. commercial crude inventories fell 8.6 million barrels in the week to Feb. 22 to 445.87 million barrels.

“Crude imports into the U.S. fell 1.6 million bpd last week, to a two-decade low,” ANZ bank said on Thursday.

Oil prices rise on Beijing-Washington trade hopes, upbeat China data

CNBC

  • Both international benchmark Brent and U.S. crude futures gained.
  • Optimism that a trade deal could be reached between the United States and China was boosted when U.S. President Donald Trump said talks were going “very well”.
  • Markets were also supported by upbeat Chinese trade data, including for crude oil.

A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.

Getty Images
A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.

Oil prices rose on Thursday, buoyed by hopes that potential progress in the latest Sino-U.S. tariff talks would improve the global economic outlook, and as China’s trade figures including crude imports beat forecasts.

U.S. West Texas Intermediate (WTI) crude futures were at $54.16 per barrel at 0413 GMT, up 26 cents, or 0.5 percent, from their last settlement.

International Brent crude oil futures were up 37 cents, or 0.6 percent, at $63.98 a barrel.

Optimism that a trade deal could be reached between the United States and China was boosted when U.S. President Donald Trump said talks were going “very well”.

“The 90-day truce (on trade) agreed in December will run out on March 1, but given the progress of the talks there could be an extension, which is why there (is) rising optimism that the two leaders will meet later that month,” said Alfonso Esparza, senior market analyst, OANDA.

Markets were also supported by upbeat Chinese trade data, including for crude oil.

China’s crude oil imports in January rose 4.8 percent from a year earlier, customs data showed on Thursday, to an average of 10.03 million barrels per day (bpd), the third straight month that imports have exceeded the 10 million bpd mark.

Not all data pointed to tighter market conditions and higher prices.

Climbing U.S. oil stockpiles weighed on prices. U.S. crude oil inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017, the Energy Information Administration said on Wednesday.

Crude inventories built for a fourth week in a row, rising 3.6 million barrels to 450.8 million barrels in the week to Feb. 8. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

U.S. crude oil production remained at a record of 11.9 million barrels per day (bpd).

The global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group’s production cuts and U.S. sanctions on Venezuela and Iran, the International Energy Agency said in a report on Wednesday.

The IEA said it expected global oil demand this year to grow by 1.4 million bpd, while non-OPEC supply will grow by 1.8 million bpd.