Oil logs strongest weekly performance in over 8 months

MarketWatch

Monthly IEA report, Syria tensions lift oil

Reuters

By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Crude-oil prices rose for a fifth straight session Friday, with U.S. benchmark crude tallying a gain of nearly 9% for the week, driven by fears of a U.S.-led military conflict in Syria.

A report from the International Energy Agency on Friday also indicated that OPEC soon will have succeeded in reaching its target for reducing the global supply glut.

May West Texas Intermediate crude CLK8, +0.48%  tacked on 32 cents, or 0.5%, to settle at $67.39 a barrel on the New York Mercantile Exchange. For the week, the U.S. oil benchmark rallied by roughly 8.6%, which was the strongest weekly percentage performance since late July of last year.

June Brent LCOM8, +0.83% added 56 cents, or 0.8%, to $72.58 a barrel on ICE Futures Europe. For the week, in the international benchmark was up about 8.2%.

On Friday, the IEA indicated that global oil stockpiles are dwindling and approaching the five-year average the Organization of the Petroleum Exporting Countries is targeting.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its report.

The Vienna agreement refers to the group of OPEC and non-OPEC countries that in 2016 agreed to cut output in an effort to reduce a global supply glut that had dragged oil prices substantially lower. The IEA report echoes the monthly data from OPEC earlier this week, which showed the group’s output declined by 201,000 in March and that the supply surplus is evaporating.

The IEA also noted that the continuing U.S.-China trade spat could dent oil demand.

Longer term, “we are bullish on oil prices as continued global economic growth drives demand higher by approximately 1.5% per year,” said Jay Hatfield, chief executive officer and founder of InfraCap. Global supply also “remains constrained by declines in Venezuela production, flat to declining production in offshore areas such as the North Sea, offset by steady growth in U.S. production of approximately 1 million barrels per day.”

Hatfield expects WTI to trade in the $60-70 range this year and $70-80 in 2019, “with more risk to the upside.”

Read: Here’s why Credit Suisse just boosted its oil price forecast by 18%

In the U.S., Baker Hughes BHGE, +1.37%  on Friday reported that the number of active domestic oil rigs edged up by 7 this week. The figure, which offers a peek at U.S. oil activity, was up a second straight week.

Still, market participants said crude futures have come under pressure amid fears that Russia may retaliate against the U.S. by imposing sanctions in response to sanctions levied against Moscow last week in response to what the U.S. said was attempts to subvert Western democracies, and malicious cyber activities.

“This news offset good news about the ratcheted down of trade tensions with China and the possibility the U.S. could be re-entering the [Trans-Pacific Partnership],” said Phil Flynn, senior market analyst at Price Futures Group, in a note.

The fear is that sanctions from Russia could hurt demand and push prices lower, he explained.

More broadly, the stellar weekly performances for both WTI and Brent this week come as geopolitical tensions have returned to the fore after a suspected chemical-weapons attack in Syria that killed civilians over the weekend. That matter is also complicated by Syria’s friendly ties with Russia, Iran and Turkey.

U.S. President Donald Trump on Wednesday warned Russia that he was ready to launch an imminent military attack on Syria, but toned down his rhetoric on Thursday.

Among energy products, gasoline RBK8, +0.34%  settled 0.5% higher at $2.065 a gallon, for a 5.7% gain on the week. May heating oil HOK8, +0.87% added 0.8% to $2.10 a gallon—up about 7.3% for the week.

May natural gas NGK18, +1.86%  rose 1.8% to $2.735 per million British thermal units, for a weekly rise of 1.3%.

Crude Oil Prices Are Up Sharply, But Is The Bakken Shale Play Back?

INVESTOR’s BUSINESS DAILY

Three years after the start of the global oil glut, crude oil prices are rising

and oil industry momentum is picking up.

U.S. benchmark West Texas Intermediate traded on Wednesday 55% above a June 2017 low. In January, crude oil prices recovered above $65 a barrel for the first time since December 2012.

During the downturn, Texas’ Permian and Eagle Ford basins rose to become the star shale oil performers with investors. Now, as industry earnings and crude oil prices continue to recover, investors are looking further afield.

The shale oil fields of the Bakken stretch north from Montana and North Dakota into Canada. The region hosted some of the first stages of the shale oil revolution. But Bakken output peaked in late 2014, then fell off sharply as crude oil prices collapsed due to a worldwide glut.

During the downturn, a number of Bakken producers declared bankruptcy. Others sold assets and shifted their focus to other regions. The Permian and Eagle Ford fields emerged as the premier U.S. shale oil plays. More than a few boomtowns fell quiet in North Dakota and Montana.

Today, the Bakken is regaining steam. Production levels are approaching their 2014 peak. Analysts are turning bullish on Bakken shale play holdouts, including Oasis Petroleum (OAS), Continental Resources (CLR), Marathon Petroleum (MPC), Hess (HES) and ConocoPhillips (COP).

It’s “the number one play” for investors looking to diversify beyond Permian holdings, said Derrick Whitfield, managing director at Stifel.

Politics & Crude Oil Prices

A meeting a week ago between President Trump and a member of the Saudi royal family sent crude oil prices higher. The reason: speculation that the U.S. planned to withdraw from the Iran nuclear deal and impose fresh sanctions. Trump’s appointments of John Bolton and CIA Director Mike Pompeo, both aggressive hawks, bolstered this view.

In addition, the Organization of Petroleum Exporting Countries and Russia are reportedly discussing a production deal that could range to 20 years. Their current agreement props prices by trimming 1.8 million barrels of oil per day from the market. It runs through the end of this year.

Production in Texas’ Permian has been going gangbusters for some time. But the recent rise in crude oil prices has prompted increased activity in shale oil fields with higher break-even prices. That includes the Bakken.

WTI oil at $55 to $60 per barrel means “things start to get interesting in the Bakken,” said Benjamin Shattuck, research director for Wood Mackenzie’s Lower 48 unit. Crude prices closed the week at $64.94 a barrel.

Five years ago, the break-even price for a barrel of oil in the 200,000 square mile Bakken play ran between $70 and $80. Today, that break-even price is closer to $50 to $60, according to Wood Mackenzie data.

That’s still significantly higher than the Permian’s average break-even. Mackenzie says that runs from the high $30s to mid-$40. But it still provides a healthy profit when prices provide enough margin.

The Bakken is one basin that “will be incredibly sensitive to price, the most sensitive of the big three oil plays. But what’s unique and interesting is that it’s very predictable. We know when we drill a well, what it will be like,” Shattuck said.

Geology & Crude Oil Price

The geology of the Bakken is more straightforward than that of the Permian, according to Trisha Curtis, president and co-founder of PetroNerds, an energy analytics and advising firm. Curtis says the Bakken is “like an Oreo cookie:” made up of a main reservoir, held in place by two shale areas on either side.

That well-defined geology has allowed Continental Resources and other key Bakken players to stake out the basin’s prime acreage. New players can’t infiltrate these areas unless they buy assets from owners looking to head south to Texas.

The Permian, on the other hand, has a “muddy layering”of  sub-basins and subplays. This allows operators to find top-producing wells outside the core acreage, but only after risky and expensive exploration.

The Bakken has benefited from advances in well drilling and completion techniques. They are essentially the same advances that have helped lower costs and break-even prices across most shale oil basins.

“The completion design has changed. There is some degree of geosteering that has improved the (Bakken),” Whitfield said. “Proppant loads have increased. You’re more effectively stimulating the reservoir today.”

EIA data show a rising number of drilled but uncompleted wells being restarted in the Bakken. Those DUC wells were drilled, then capped, before the downturn. They come back online as prices rise, needing only to be “completed” by services companies. Prices for pressure pumping and other completion services related to hydraulic fracturing are lower now than they were as production peaked in 2014. Those costs will eventually rise. But, for now, they help to lower producers’ break-even costs.

Bottlenecks And Break-Even Prices

The Permian and the Bakken are the most well-developed U.S. shale oil basins. But both continue to face bottleneck issues. Those issues relate primarily to the takeaway capacity of rail terminals and pipelines. Water supply limitations and truck congestion can also be problems.

The Bakken went through the worst of that phase in 2008 to 2010, Whitfield says.

“A lot of the Bakken from the logistical perspective, like rail and pipe, was all established back during the period,” Whitfield said. “It’s very capital efficient to grow in the Bakken now. You don’t have to build more terminals.”

Outflow from the Bakken received a boost in June last year. That’s when the Dakota Access pipeline — the subject of a year-long protest at South Dakota’s Standing Rock Sioux Reservation — launched operations. The line delivers Bakken oil to a hub in Illinois. The hub then feeds Midwestern refineries around the always thirsty Chicago market.

The Dakota Access has a total eventual capacity of 570,000 barrels per day. Rail transport, such as that which supplies oil to the Philadelphia Energy Solutions refinery, still accounts for as much as 70% of Bakken’s take away. But the new pipeline helps drive down the delivery cost of Bakken oil.

Another price benefit may come from sand. The Permian’s soaring demand for local sand in Texas could help lower fracking sand costs in the Bakken. Some high-quality northern white sand once shipped out of Wisconsin to Texas is now likely to be redirected to the Bakken, Whitfield suggests. The increased supply could force competing sand vendors to lower prices.

Is The Bakken Back?

Last month, Texas-based Smart Sand (SND) announced a $15.5 million deal to expand its facilities in the Bakken. The deal provided rights to the Van Hook train terminal for unloading sand. That outlet will help digest added supply from the Wisconsin frac sand mine it expanded earlier this year.

The Bakken’s recovering production follows a shift among exploration and production companies away from spending to chase rising oil prices.

“Producers are more focused on bringing cash to the bottom line than in the past, when they were more interested in developing proven resources,” said James Williams, an economist at energy consultant WTRG.

While the Bakken is getting increased attention, Curtis said there won’t be a rush of new players, such as has been the case in the Permian.

“I wouldn’t say it’s back. I would say you have core players in the Bakken that are running with it, that it was their baby and that’s going to drive it,” Curtis said.

But so long as prices hold near $60, the Bakken will play a critical role in keeping U.S. shale oil production on an uptrend into the 2020s, Williams says.

“I mean, we are going to keep increasing production at well over 1 million barrels per day a year unless prices collapse,” Williams said. “If they collapse the whole game changes.”

Crude Oil Prices – Weekly Outlook: March 12 – 16

© Reuters.  Crude oil prices score a gain for the week © Reuters. Crude oil prices score a gain for the week

Investing.com – Oil prices rallied sharply on Friday, scoring a weekly gain, as traders cheered data showing the number of U.S. oil rigs fell for the first time in seven weeks, pointing to a potential slowdown in domestic oil output.

Improved appetite for risk-sensitive assets in the wake of strong U.S. jobs data and news of a potential U.S.-North Korea meeting also contributed to oil’s price rise.

U.S. West Texas Intermediate (WTI) crude futures for April delivery surged $1.92, or 3.2%, to close at $62.04 a barrel.

The U.S. benchmark slipped to a three-week low of $59.95 on Thursday, as investors worried over soaring U.S. output levels.

Meanwhile, May Brent crude futures, the benchmark for oil prices outside the U.S., jumped $1.88, or roughly 3%, to settle at $65.49 a barrel.

For the week, WTI crude rose 1.3%, while Brent gained 1.7%.

The number of oil drilling rigs fell by four to 796 last week, General Electric (NYSE:GE)’s Baker Hughes energy services firm said in its closely followed report on Friday.

That marked the first such decline in seven weeks, suggesting the possibility of a fall in future output.

That came after data on Wednesday showed U.S. oil production, driven by shale extraction, rose to an all-time high of 10.37 million barrels per day (bpd), staying above Saudi Arabia’s output levels and within reach of Russia, the world’s biggest crude producer.

Analysts and traders have recently warned that booming U.S. shale oil production could potentially derail OPEC’s effort to end a supply glut.

The Organization of the Petroleum Exporting Countries, along with some non-OPEC members led by Russia, have been restraining production by 1.8 million bpd to curb the market of excess supply. The arrangement, which was adopted last winter, expires at the end of 2018.

In the week ahead, market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.

Oil traders will also focus on monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency to assess global oil supply and demand levels.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday

The U.S. Energy Information Administration (EIA) is to issue a monthly update on shale-oil production levels

Tuesday

The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.

Wednesday

The Organization of Petroleum Exporting Counties will publish its monthly assessment of oil markets.

Later on, the U.S. EIA is to release weekly data on oil and gasoline stockpiles.

Thursday

The International Energy Agency will release its monthly report on global oil supply and demand.

The U.S. government will publish a weekly report on natural gas supplies in storage.

Friday

Baker Hughes will release weekly data on the U.S. oil rig count.

US Crude Oil Futures near 1-Week High

Market Realist

US crude oil futures 

April WTI crude oil futures contracts rose 2.2% to $62.57 per barrel on March 5, 2018—the highest settlement since February 27, 2018. Brent crude oil futures contracts rose 1.8% to $65.5 per barrel on March 5, 2018.

The Energy Select Sector SPDR ETF (XLE) and the Vanguard Energy ETF (VDE) rose ~1.1% and ~1.3%, respectively, on March 5, 2018. These funds have exposure to upstream energy companies.

image002

Crude oil and ETFs’ performance 

Crude oil prices rose on March 5, 2018, due to the expectation of a fall in Cushing crude oil inventories, supply outages in Libya, strong demand, and ongoing supply cuts.

However, US crude oil prices declined ~2% on February 26–March 5, 2018. Prices declined due to the larger-than-expected rise in US oil inventories, an unexpected rise in gasoline inventories, and record US oil production.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the VanEck Vectors Oil Services ETF (OIH) decreased 0.1% and 2.1%, respectively, on February 26–March 5, 2018. XLE and VDE declined 2.2% and 2%, respectively, during the same period. XOP outperformed the other energy ETFs. These ETFs have exposure to oil and gas companies.

Crude oil inventory report  

On March 7, 2018, the EIA will release its crude oil inventory report. Bloomberg estimates that US oil inventories could have increased by 2.5 million barrels on February 23–March 2, 2018. A larger-than-expected increase in US crude oil inventories could pressure oil prices. 

Crude Oil Prices – Weekly Outlook: Feb. 12 – 16

 
© Reuters. Oil prices drop nearly 10% for the week, worst loss in almost two years © Reuters. Oil prices drop nearly 10% for the week, worst loss in almost two years

Investing.com – Oil prices finished lower for a sixth straight session on Friday to tally their worst weekly loss in two years, as investors continued to fret over soaring U.S. output levels.

Steep losses in the global stock market this week and a strengthening dollar also contributed to oil’s losses.

U.S. West Texas Intermediate (WTI) crude futures for March delivery sank $1.95, or around 3.2%, to close at $59.20 a barrel. It fell to its worst level since Dec. 22 at $58.07 earlier in the session.

Meanwhile, April Brent crude futures, the benchmark for oil prices outside the U.S., tumbled $2.02, or roughly 3.1%, to settle at $62.79 a barrel, after it touched a more than nine-week low of $61.77 earlier in the day.

For the week, WTI crude lost roughly 9.6%, which was the biggest such decline since January 2016, while Brent gave up about 8.5%.

The number of oil drilling rigs jumped by 26 to 791 last week, General Electric (NYSE:GE)’s Baker Hughes energy services firm said in its closely followed report on Friday.

That marked a third straight week of increases and the largest weekly rise in more than a year, implying that further gains in domestic production are ahead.

That came after data on Wednesday showed U.S. oil production, driven by shale extraction, rose to an all-time high of 10.25 million barrels per day (bpd). That figure is above that of top exporter Saudi Arabia and within reach of Russia’s output levels.

That added to fears that rising U.S. output would dampen OPEC’s efforts to rid the market of excess supplies.

The producer group, along with some non-OPEC members led by Russia, agreed in December to extend oil output cuts until the end of 2018.

The deal to cut oil output by 1.8 million barrels a day (bpd) was adopted last winter by OPEC, Russia and nine other global producers. The agreement was due to end in March 2018, having already been extended once.

Among other energy contracts, March gasoline futures slumped 6.4 cents, or 3.6%, to end at $1.700 a gallon on Friday, with prices suffering a weekly loss of around 9.2%.

Heating oil for March edged down 6.6 cents, or 3.4%, to $1.855 a gallon, posting a weekly drop of around 9.7%.

Meanwhile, natural gas futures plunged 11.3 cents, or 4.2%, to $2.584 per million British thermal units, its lowest finish since late February 2017, for a weekly decline of 9.2%.

In the week ahead, market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.

Oil traders will also focus on monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency to assess global oil supply and demand levels.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday

The Organization of Petroleum Exporting Counties will publish its monthly assessment of oil markets.

Tuesday

The International Energy Agency will release its monthly report on global oil supply and demand.

Later in the day, the American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.

Wednesday

The U.S. Energy Information Administration is to release weekly data on oil and gasoline stockpiles.

Thursday

The U.S. government will also publish a weekly report on natural gas supplies in storage.

Friday

Baker Hughes will release weekly data on the U.S. oil rig count.

Crude Oil Prices Struggle, Gold May Return to the Offensive

NASDAQ

DailyFX.com –

Talking Points:

  • Crude oil prices struggle to find fuel to break range boundaries
  • Gold prices may return to the offensive following a brief pause
  • Haggling over US tax cut plan may inspire week-end volatility

Crude oil prices corrected gently higher but didn’t to make significant progress outside of recent ranges. Baker Hughes rig count data as well as ICE and CFTC speculative sentiment statistics are due out, but these are rarely market-moving. That makes continued consolidation likely into the week-end.

Gold prices paused to digest gains as expected following a sharp surge in the aftermath of the FOMC monetary policy announcement. A quiet data docket Friday hints the path of least resistance might favor the upside as “fade the Fed” dynamics re-emerge .

Politics may complicate things however as Congressional Republicans delay until Monday a tax cut plan reconciling proposals from the Senate and the House of Representatives. That’s after two senators planned to oppose it, with two more undecided. That’s two possibly lost votes too many to assure passage.

The absence of top-tier scheduled event risk might put the spotlight on Washington DC horse-trading. Headlines suggesting the voting math will work after all may stoke risk appetite, sending yields higher and hurting gold. A confirmed breakdown will probably produce the opposite result.

What are the long-term drivers of crude oil price trends? See our guide to find out!

GOLD TECHNICAL ANALYSIS – Gold prices continue to eye resistance at 1264.92, the 23.6% Fibonacci expansion, with a daily close above that targeting the 38.2% level at 1282.61. Alternatively, a turn below the 14.6% Fib expansion at 1241.36 exposes the December 12 low at 1236.32, followed by the 23.6% expansion at 1230.45.

Crude Oil Prices Struggle, Gold May Return to the Offensive Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices remain stuck in what is increasingly looking like a Triangle chart pattern. That setup typically precedes trend continuation, which is a bullish sign in this case. A daily close above the Triangle top (58.42) exposes the 23.6% Fibonacci expansion at 59.83. Alternatively, a push below the formation’s bottom (56.20) targets the 23.6% Fib retracement at 55.04.

Crude Oil Prices Struggle, Gold May Return to the Offensive Chart created using TradingView

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

Brent crude jumps to highest since mid-2015 after North Sea pipeline outage

CNBC

  • Brent oil prices jumped 1.5 percent on Tuesday to their highest since mid-2015
  • Britain’s Forties oil pipeline was closed for repairs after several cracks were revealed
  • The jump in Brent prices widened its premium to WTI prices

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Brent oil prices jumped 1.5 percent on Tuesday to their highest since mid-2015, after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market already tightening due to OPEC-led production cuts.

Brent crude futures, the international benchmark for oil prices,were at $65.63 a barrel at 0556 GMT, up 94 cents, or 1.5 percent, from their last close.

That marks the first time Brent has risen above $65 since June, 2015.

U.S. West Texas Intermediate (WTI) crude futures were at $58.41 a barrel, up 42 cents, or 0.7 percent, from their last settlement.

“Brent crude raced higher … as news broke that the North Sea’s Forties Pipeline system would have to be shut down for a ‘number of weeks’ after a hairline crack was found in it,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore. “The pipeline … is a significant component underpinning the Brent benchmark.”

Britain’s Forties oil pipeline, the country’s largest at a capacity of 450,000 barrels per day (bpd), shut down on Monday after cracks were revealed.

“The market reaction shows that in a tight market, any supply issue will quickly be reflected in higher prices,” said ANZ bank.

Going wide

The jump in Brent prices widened its premium to WTI prices to over $7 a barrel, the highest premium since May 2015 and up from around $5 last week, making U.S. oil exports more attractive.

Cheaper WTI is also a result of rising U.S. oil production, which has jumped by more than 15 percent since mid-2016 to 9.71 million bpd, levels not seen since the early 1970s.

U.S. production is now also not far off that of top producers Russia and Saudi Arabia.

The rising U.S. output threatens to undermine efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, most importantly Russia, to support prices by withholding supplies.

OPEC and its allies started withholding supplies last January and currently plan to continue doing so throughout 2018.