Oil slips on uncertainty over US-China trade deal, surging inventories

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Reuters
KEY POINTS
  • Brent crude, the global benchmark, was down 16 cents, or 0.3%, at $62.13 a barrel by 0259 GMT, after gaining 0.9% in the previous session.
  • U.S. West Texas Intermediate (WTI) crude was down 23 cents, or 0.4%, at $56.92 a barrel. The contract rose 1.4% on Thursday.
GP: Oil tank North Dakota 190926
A photo taken August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Crude oil futures fell on Friday amid lingering uncertainty on whether, and when, the United States and China will agree a long-awaited deal to end their bitter trade dispute, the gloom compounded by rising crude inventories in the United States.

Brent crude, the global benchmark, was down 16 cents, or 0.3%, at $62.13 a barrel by 0259 GMT, after gaining 0.9% in the previous session.

U.S. West Texas Intermediate (WTI) crude was down 23 cents, or 0.4%, at $56.92 a barrel. The contract rose 1.4% on Thursday.

The trade war between the world’s two biggest economies has slowed economic growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

On Thursday, the Chinese commerce ministry said the two countries have agreed in the past two weeks to cancel trade tariffs in different phases, without giving a timeline.

But that comment was shrouded in doubt soon after when Reuters reported that the plan faces stiff internal opposition in the U.S. administration.

“Oil is in pause mode as traders await more details on the trade talks,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Also concentrating minds among sector watchers were remarks by OPEC Secretary-General Mohammad Barkindo this week that he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, appearing to downplay any need to cut output more deeply.

A deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, such as Russia, is limiting supplies until March next year. The producers meet on Dec. 5-6 in Vienna to review that policy.

Barkindo’s comments are “spooking the market, especially in the face of the seemingly never-ending run of U.S. inventory builds,” said AxiTrader’s Innes.

U.S. crude oil stockpiles rose sharply last week as refineries cut output and exports dropped, while refined products extended a multi-week drawdown, the Energy Information Administration said on Wednesday.

Stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 1.7 million barrels, the EIA said.

Oil prices climb amid Saudi tensions, but demand outlook drags

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  • Saudi Arabia has been under international scrutiny following the disappearance of a prominent journalist who was a critic of the administration.

Crude oil futures rose on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked worries about supply, although concerns about the long-term outlook for demand dragged on prices.

Crude markets were also supported in the wake of data that showed South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against the Middle Eastern country take effect in November.

Brent crude had risen $1.01, or 1.26 percent, to 81.44 a barrel by 0424 GMT, on track for its biggest daily gain since Oct. 9.

U.S. crude futures climbed 80 cents, or 1.12 percent, to $72.14 a barrel, extending gains they racked up on Friday after hefty losses on Wednesday and Thursday.

“The market has again expressed concerns over geopolitical tensions in the Middle East after U.S. and Saudi traded comments over the disappearance of the Saudi journalist, leading to a jump in prices,” Wang Xiao, head of crude research with Guotai Junan Futures, wrote in a research note.

Saudi Arabia has been under pressure since Jamal Khashoggi, a prominent critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul.

The kingdom would retaliate against possible economic sanctions taken by other states over the case, its state news agency SPA reported on Sunday quoting an official source.

Meanwhile, South Korea in September stopped importing Iranian oil for the first time in years.

“South Korea’s move to stop Iran oil imports is giving the market confidence on prices,” said Chen Kai, head of research at brokerage Shengda Futures.

Lingering geopolitical worries, trade concerns and a weaker economic outlook may pave the way for another week of volatile trading, Chen said, adding that Monday’s recovery in prices was “fragile”.

Putting downward pressure on oil prices, the International Energy Agency, the West’s energy watchdog, said in its monthly report that the market looked “adequately supplied for now” and trimmed its forecasts for world oil demand growth this year and next.

That comes after the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) last week said the group sees the oil market as well supplied and that it was wary of creating a glut next year.

Crude oil futures stable on Russian data ahead of US stocks report

S&P GLOBAL, PLATTS

Singapore — Crude oil futures were stable to higher during mid-morning trade in Asia Tuesday, with the Brent futures contract largely unchanged on the back of stable production data from Russia and the NYMEX WTI contract edging higher ahead of the release of weekly US inventory reports.

At 10:30 am Singapore time (0230 GMT), ICE November Brent crude futures were down a marginal 3 cents/b (0.04%) from Monday’s settle at $78.12/b, while the NYMEX October light sweet crude contract was 26 cents/b (0.37%) higher than Friday’s settle at $70.06/b. The US market was closed Monday for Labor Day.

“WTI appears to be catching up with Brent’s climb on Monday while the US markets were closed,” said Vandana Hari, founder Vanda Insights. “Brent appears to be taking a pause this morning after touching three-month highs,” she added.

Russia’s crude and condensate production averaged 11.21 million b/d in August, dipping 8,000 b/d from July, when the country cranked up production significantly, according to preliminary data released Sunday by the Central Dispatching Unit, the energy ministry’s statistics arm.

Russia started raising oil output in June after the the OPEC/non-OPEC coalition agreed to ease production caps in effect since 2017. Russia’s production in August was estimated at 253,000 b/d above the level envisaged under the initial production cut deal, energy minister Alexander Novak said Monday. “In September, the output is expected at the level of July, August,” Novak was quoted as saying by Prime news agency.

“Russia is also unable to significantly expand its production which, following an increase in the summer, is now close to its post-Soviet record high,” said Commerzbank analysts in a note. “It therefore remains unclear whether OPEC will be able to absorb a potentially massive fall in Iranian oil exports due to the US sanctions,” they added.

Meanwhile, NYMEX WTI prices were trading slightly higher during the Asian morning session ahead of the release of weekly US crude inventory data, which will be delayed this week by the Labor Day holiday.

The larger-than-expected draw in US crude inventories for the week ended August 24 has been keeping prices supported, analysts said.

Preliminary reports on last week’s US crude inventory levels are due for release by the American Petroleum Institute on Wednesday and the more definitive numbers by the US Energy Information Administration on Thursday.

Elsewhere, analysts from BNP Paribas have lowered their forecasts for oil prices for the rest of the year in light of stable demand-supply expectations.

“We do not expect oil demand to be materially impacted in the next 6-9 months by economic uncertainty linked to US/China trade tensions and recent concerns over emerging markets,” said Harry Tchilinguirian, senior oil strategist at BNP Paribas.

On the impact of the loss of Iranian crude barrels in the market as a result of the US sanctions, Tchilinguirian said that although an initial supply gap was likely to emerge, given average inventory levels in the OECD, the oil market was expected to resolve the supply gap through higher prices.

“We see WTI averaging $68/b in 2018 and Brent at $74/b. In 2019, we see WTI averaging $74/b and Brent at $79/b,” Tchilinguirian added.

Market participants were also watching Tuesday for developments in the US-China trade war, with the US expected to announce another round of tariffs on Chinese goods.

“We might see renewed downward pressure on crude later this week if the US goes ahead with imposing tariffs on $200 billion worth of Chinese imports,” Hari said.

As of 0230 GMT, the US Dollar Index was up 0.12% at 95.185.

Crude oil prices ease on prospects of higher world supplies

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  • 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 prices rise as US President Trump set to meet North Korea’s Kim

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  • Crude oil futures rose on Friday.
  • Asian stock markets gained on news that North Korean leader Kim Jong Un will meet with U.S. President Donald Trump.
  • Beside geopolitics, oil markets were mainly concerned with soaring output from the United States.

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.

Crude oil futures rose on Friday as Asian stock markets gained on news that North Korean leader Kim Jong Un will meet with U.S. President Donald Trump.

The two will likely meet by May and Kim has pledged to refrain from further nuclear or missile tests, South Korea’s national security chief said late on Thursday after briefing White House officials on talks between Seoul and Pyongyang.

The White House said Trump would accept the invitation at a place and time to be determined.

The news lifted Asian stocks markets, and pulled crude oil futures along with them, traders said.

Brent crude futures were at $63.95 per barrel at 0102 GMT, up 34 cents, or 0.5 percent, from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were at $60.39 a barrel, up 27 cents, or 0.45 percent. WTI also fell by more than 2 percent the previous session.

Beyond geopolitics, oil markets were mainly concerned with soaring output from the United States, which has risen by 23 percent since mid-2016, to 10.37 million barrels per day (bpd).

That’s more than top exporter Saudi Arabia produces. Only Russia pumps more, at almost 11 million bpd.

“It seems only a matter of time before the U.S. becomes the biggest oil producer in the world. The main question which keeps investors busy is when exactly this will be reached,” Hans van Cleef, senior energy economist at Dutch bank ABN Amro, said in a note to investors.

Crude oil falls, hits one week low

Crude oil falls, hits one week low  

Unlike Middle East producers, where output is largely dictated by state-owned oil companies, U.S. producers drill and sell purely based on economics. If prices remain at current levels or rise further, U.S. drillers are profitable and will raise output; if prices stumble, U.S. production will fall.

“The correlation between the U.S. oil production and the oil prices will remain considerable,” van Cleef said.

As much as on production, oil prices will depend on demand.

“Global demand will continue to grow by 1.5 million barrels per day in both 2018 and 2019. This would offer enough room for U.S. oil producers to increase production and for OPEC and her allies to minimalize the production cuts towards the end of 2019,” van Cleef said.

The Middle East-dominated Organization of the Petroleum Exporting Countries(OPEC) and Russia since 2017 have been leading an effort to withhold production to prop up prices.