Oil prices slide as trade wars roil financial markets

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Reuters

KEY POINTS
  • Front-month Brent crude futures were at $61.16 at 0109 GMT. That was 83 cents, or 1.3%, below Friday’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $52.88 per barrel, down 62 cents, or 1.2% from its last settlement.
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Oil prices fell more than 1% on Monday, extending losses of over 3% from Friday, when crude markets racked up their biggest monthly losses in six months amid stalling demand and as trade wars fanned fears of a global economic slowdown.

Front-month Brent crude futures were at $61.16 at 0109 GMT. That was 83 cents, or 1.3%, below Friday’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.88 per barrel, down 62 cents, or 1.2% from its last settlement.

The drops followed price slumps of more than 3% on Friday, which made May the worst-performing month for crude futures since last November.

“Oil prices slid on fresh trade worries after U.S. President Donald Trumpstoked global trade tensions by threatening tariffs on Mexico, which is one of the largest U.S. trade partners and a major supplier of crude oil, ” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities, in a note on Monday.

Edward Moya, senior market analyst at futures brokerage OANDA in New York, said last month’s crude oil price fall of more than 10% was “the worst May performance in seven years as the escalation of the global trade war saw the global growth outlook crumble.”

Moya warned “geopolitical risks remain in place” and added that “oil remains vulnerable” because of a weakening demand outlook for crude.

“The U.S.-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the U.S. and Mexico raised the slower demand picture for the Americas, ” he said.

Barclays bank said in a note published last Friday that U.S. March oil consumption “declined significantly year-on-year for the first time since September 2017 …(as) petroleum demand fell almost 370,000 barrels per day (bpd) year-on-year on weak consumption across the barrel.”

Rising US supply

U.S. bank Goldman Sachs said in a note published on Sunday that “escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment”.

Brent crude oil prices have dropped almost 20% from their 2018-peak in late April.

“The magnitude and velocity of the move lower were further exacerbated by growing concerns over strong U.S. production growth and rising inventories,” Goldman said.

U.S. energy firms this week increased the number of oil rigs operating for the first time in four weeks, and weekly production last stood at a record 12.3 million barrels per day (bpd).

That’s pushed up commercial U.S. crude oil inventories, which have increased by 8.4% since the start of the year to 476.5 million barrels.

“With an increasingly uncertain macro outlook as well as rising U.S. production and large available core-OPEC spare capacity helping offset declining supply from Iran and Venezuela, we instead expect prices will likely remain around our 3Q forecasts and current levels, albeit with still high price volatility, ” Goldman said.

The bank’s Brent price forecast for the third quarter of this year was $65.50 per barrel.

Oil drops as trade war concerns outweigh supply disruptions

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $69.60 a barrel at 0332 GMT, down 51 cents, or 0.7%, from the last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $58.50 per barrel, down 64 cents, or 1.1%, from their last settlement.
RT: China oil refinery workers
Employees close a valve of a pipe at a PetroChina refinery in Lanzhou, Gansu province.
Stringer | Reuters

Oil prices fell on Wednesday on concerns the Sino-U.S. trade war could trigger a global economic downturn, but relatively tight supply amid OPEC output cuts and political tensions in the Middle East offered some support.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.60 a barrel at 0332 GMT, down 51 cents, or 0.7%, from the last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $58.50 per barrel, down 64 cents, or 1.1%, from their last settlement.

“Crude oil was weak … primarily as the bears on demand are winning compared to the bulls on supply,” James Mick, managing director and energy portfolio manager with U.S. investment firm Tortoise, said in an investor podcast.

“Investors are concerned from a macro perspective about worldwide demand, particularly in the face of the growing trade dispute between the U.S. and China, ” he said.

Fawad Razaqzada, analyst at futures brokerage Forex.com, said another concern was that “falls in emerging market currencies (are) making dollar-priced crude oil dearer to purchase in those nations” and that crude prices could fall back.

Despite the economic concerns, global oil demand is so far holding up well, likely averaging over 100 million barrels per day (bpd) this year for the first time, according to data from the U.S. Energy Information Administration (EIA).

But analysts are concerned that tightening credit amid the economic slowdown will hamper trading in commodities.

“We remain cautious regarding the short-term macroeconomic environment,” commodity brokerage Marex Spectron said in a note.

“Credit availability on the physical commodity markets is of particular concern.”

Eastport, a Singapore-based tanker brokerage, had similar concerns.

“An increase in caution and risk aversion could weigh on economic growth,” it said in a note on Wednesday.

Despite these concerns dragging on oil markets, crude prices remain relatively tight.

“Supply risks remain at elevated levels with continued geopolitical uncertainty in the Middle East, as well as Venezuela’s well-known struggles, ” said Tortoise’s Mick.

Adding to this are ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) since the start of the year to prop up the market.

OPEC and some allies including Russia are due to meet in late June or early July to discuss output policy going forward.

Oil prices rise amid OPEC supply cuts, but trade worries weigh

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.
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Andrew Burton | Getty Images

Oil prices rose on Monday as ongoing supply cuts led by producer club OPEC kept markets relatively tight, but Brent remained below $70 per barrel on concerns over an ongoing trade war between the United States and China.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.

“The relative strength of the very short end of the curve likely reflects the market pricing in a known variable of lower supplies from OPEC+,” said Edward Bell, commodity analyst at Emirates NBD bank.

A group of producers led by the Organization of the Petroleum Exporting Countries (OPEC), known as OPEC+, has been withholding supply since the start of the year to tighten the market and prop up prices.

But Monday’s gain could not make up for falls last week, when both crude futures contracts registered their biggest price declines this year amid concerns that the Sino-American trade dispute could accelerate a global economic slowdown.

Money managers cut their net long U.S. crude futures and options positions in the week to May 21, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

“Some signs of low confidence are creeping into positioning data,” Bell said.

In oil futures markets, the trade war effect is better seen beyond the spot market.

“The impact from a trade war is a more medium- to long-term issue and Dec. spreads weakened sharply over the last week,” he said.

Beyond financial markets, there are also signs on the ground of a slowdown in oil demand growth.

China’s automobile sales, a key driver of global oil demand growth, will reach around 28.1 million units this year, unchanged from levels seen in 2018, when the country’s auto market contracted for the first time in more than two decades, state news agency Xinhua reported on Sunday.

The outlook for flat car sales may be too optimistic still, as monthly sales have so far declined for 10 consecutive months.

A bright spot for carmakers, although not for the oil industry, is that sales of new energy vehicles are likely to grow by about 27 percent to hit 1.6 million units, from 1.26 units in 2018, the report said.

Oil rises amid escalating Middle East tensions

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Reuters

KEY POINTS
  • Brent crude futures were at $72.16 a barrel at 0349 GMT, up 39 cents, or 0.5%, from their last close. Brent closed up 0.7% on Wednesday.
  • U.S. West Texas Intermediate (WTI) crude futures were at $62.41 per barrel, up 39 cents, or 0.6%, from their previous settlement. WTI closed up 0.4% in the last session.
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Offshore oil platforms are seen at the Bouri Oil Field off the coast of Libya.
Darrin Zammit Lupi | Reuters

Oil prices rose on Thursday for a third straight session, as the risk of conflict in the Middle East stoked fears of supply disruptions, negating an unexpected rise in U.S. inventories.

Brent crude futures were at $72.16 a barrel at 0349 GMT, up 39 cents, or 0.5%, from their last close. Brent closed up 0.7% on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were at $62.41 per barrel, up 39 cents, or 0.6%, from their previous settlement. WTI closed up 0.4% in the last session.

Analysts said oil was drawing support from heightened tensions in the Middle East, with helicopters carrying U.S. staff from the American embassy in Baghdad on Wednesday out of apparent concern about perceived threats from Iran.

While the gain in U.S. inventories overnight is helping to cap prices, so too is uncertainty about whether OPEC and other producers will maintain into the second half of the year supply cuts that have boosted prices more than 30% so far in 2019.

The Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday that world demand for its oil would be higher than expected this year.

“Though supply-side disruptions remain supportive of oil prices, OPEC has yet to release indicative statements on supply plans,” Benjamin Lu, commodities analyst at Phillip Futures in Singapore, told Reuters by email.

Supply losses from OPEC members Iran and Venezuela, now under U.S. sanctions, have deepened the impact of the OPEC-led production restrictions.

The so-called OPEC+ group of producers, which includes Russia, meets next month to review whether to maintain the pact beyond June.

U.S. crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, the Energy Information Administration (EIA) said.

Crude stocks swelled by 5.4 million barrels, surprising analysts who had expected a decrease of 800,000 barrels for the week ended on May 10.

Oil drops on surprise US stockpile rise, but Middle East tensions support

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Reuters

KEY POINTS
  • Brent crude futures were at $71.04 a barrel at 0358 GMT, down 20 cents, or 0.3%, from their last close. Brent closed 1.4% higher on Tuesday.
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.38 per barrel, down 40 cents, or 0.7%, from their previous settlement. WTI closed up 1.2% in the previous session.
RT: Oil refinery Libya 131218
Ismail Zitouny | Reuters

Oil prices fell on Wednesday after data showed a surprise rise in U.S. crude stockpiles and Chinese industrial output for April grew less than expected, but prices were supported by mounting tensions in the Middle East.

Brent crude futures were at $71.04 a barrel at 0358 GMT, down 20 cents, or 0.3%, from their last close. Brent closed 1.4% higher on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures were at $61.38 per barrel, down 40 cents, or 0.7%, from their previous settlement. WTI closed up 1.2% in the previous session.

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

Crude inventories rose by 8.6 million barrels in the week to May 10 to 477.8 million, compared with analysts’ expectations of a decrease of 800,000 barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.1 million barrels, API said.

The U.S. Energy Department’s Energy Information Administration (EIA) reports official numbers later today.

“If the EIA report confirms a strong build we could see that weigh on oil prices…but too many geopolitical risks remain that should keep prices supported,” Edward Moya, senior market analyst at OANDA told Reuters by email.

Oil prices have drawn support after Saudi Arabia on Tuesday said armed drones struck two of its oil pumping stations, two days after the sabotage of oil tankers near the United Arab Emirates, while the U.S. military said it was braced for “possibly imminent threats to U.S. forces in Iraq ” from Iran-backedforces.

The attacks took place against a backdrop of U.S.-Iranian tension following Washington’s decision this month to try to cut Iran’s oil exports to zero and to beef up its military presence in the Gulf in response to what it said were Iranian threats.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday said that world demand for its oil would be higher than expected this year as supply growth from rivals including U.S. shale producers slows. That points to a tighter market if the exporter group refrains from raising output.

Elsewhere, growth in China’s industrial output slowed more than expected to 5.4% in April from a 4-1/2 year high in March, reinforcing views that Beijingwill have to roll out more stimulus measures as a trade war with the United States intensifies.