Oil prices climb after Saudi oilfield attack, but recession worries drag

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Reuters
KEY POINTS
  • Brent crude was up 64 cents, or about 1.1%, at $59.28 a barrel at 0255 GMT,
  • U.S. crude was up 55 cents, or 1%, at $55.42 a barrel.
Reusable: Oil pump jack and pipes California
A pump jack and pipes at an oil field near Bakersfield, California.
Lucy Nicholson | Reuters

Crude oil prices rose on Monday following a weekend attack on a Saudi oil facility by Yemeni separatists and as traders looked for any signs that Sino-U.S. trade tensions could ease.

But price gains were capped by an unusually downbeat OPEC report that stoked concerns about growth in oil demand.

Brent crude was up 64 cents, or about 1.1%, at $59.28 a barrel at 0255 GMT,

U.S. crude was up 55 cents, or 1%, at $55.42 a barrel.

“Oil is benefiting from an overall optimism that we won’t see the doomsday trade war scenario and after a drone attack on oil and gas facilities in Saudi Arabia reminded markets geopolitical tensions in the Middle East are going nowhere anytime soon, ” said Edward Moya, senior market analyst at OANDA in New York.

A drone attack by Yemen’s Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.

Meanwhile, White House economic adviser Larry Kudlow said trade deputies from the United States and China would speak within 10 days and could advance negotiations over ending a trade battle between the two countries if those talks pan out.

But U.S. President Donald Trump appeared less optimistic than his aides on striking a trade deal with China, saying that while he believed Beijing was ready to come to an agreement, “I’m not ready to make a deal yet.”

Concerns about an economic recession continued to weigh on crude prices even as Trump and top White House officials dismissed concerns that U.S. economic growth may be faltering.

Elsewhere, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.

It is rare for OPEC to give a bearish forward view on the market.

Also weighing on prices, U.S. energy firms this week increased the number of oil rigs operating for the first time in seven weeks despite plans by most producers to cut spending on new drilling this year.

Traders will also be looking out for key manufacturing data due later this week from Europe and the United States, said Michael McCarthy, chief market strategist, CMC Markets.

Crude oil prices fall amid fears about global economy

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Reuters

KEY POINTS
  • U.S. West Texas Intermediate crude futures were down 1.1% at $56.72 per barrel by 0310 GMT. There was no settlement price on Thursday because of the Independence Day holiday in the United States.
  • Front-month Brent crude futures were down 0.1% at $63.25 per barrel, after closing down 0.8% on Thursday.
Reusable: Rusted oil jacks Texas 150326
Rusted out “pump-jacks” in the oil town of Luling, Texas.
Getty Images

Crude oil prices fell on Friday as concerns over the outlook for global economic growth outweighed elevated tensions in the Middle East that could disrupt supply routes and send prices higher.

U.S. West Texas Intermediate (WTI) crude futures were down 1.1% at $56.72 per barrel by 0310 GMT. There was no settlement price on Thursday because of the Independence Day holiday in the United States.

Front-month Brent crude futures were down 0.1% at $63.25 per barrel, after closing down 0.8% on Thursday.

Analysts said oil was under pressure because fears over future demand amid trade disputes threatening global economic growth. But losses were checked by commitment to cut production from the world’s largest exporters – including members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a grouping known as OPEC+.

“Global growth remains the main factor holding back crude prices,” said Alfonso Esparza, senior analyst at OANDA. “The OPEC+ deal will keep prices from falling too hard, but there must be an end to trade protectionism to assure the demand for energy products recovers.”

New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, stoking economic concerns.

The U.S. Energy Information Administration on Wednesday reported a weekly decline of 1.1 million barrels in crude stocks, much smaller than the 5 million barrel draw reported by the American Petroleum Institute earlier in the week.

That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy.

Countering the downward pressure, ongoing tensions in the Middle East also offered some support.

British Royal Marines seized a giant Iranian oil tanker in Gibraltar on Thursday for trying to take oil to Syria in violation of EU sanctions, a dramatic step that drew Tehran’s fury and could escalate its confrontation with the West.

International oil prices slip amid escalation of US-China trade spat; drop in US crude inventories offers support

CNBC

  • U.S. crude oil prices saw more gains on Thursday as commercial crude inventories stateside declined.
  • Meanwhile, international crude markets were down as a result of concerns over the ongoing U.S.-China trade dispute.

International oil prices slipped on Thursday, weighed down by the escalating trade dispute between the United States and China, although a decline in U.S. commercial crude inventories offered some support.

International benchmark Brent crude oil futures were at $74.63 per barrel at 0422 GMT, down 18 cents, or 0.2 percent, from their last close.

West Texas Intermediate (WTI) crude futures were at $67.90 per barrel, up 4 cents from their last settlement, buoyed by the decline in U.S. crude inventories.

International markets weakened as the intensifying trade spat between the United States and China was seen as a drag on economic growth.

The United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of the other’s goods. Washington is holding hearings this week on a proposed list of an additional $200 billion worth of Chinese imports to face duties.

“These (overall) measures are expected to shave up to 0.3-0.5 percentage points from China’s real GDP growth in 2019,” said rating agency Moody’s Investor Service.

“For the U.S. … trade restrictions will trim off about one quarter of a percentage point from real GDP growth to 2.3 percent in 2019.”.

In U.S. oil markets, a decline in commercial crude inventories provided WTI with stronger support than Brent.

Greg McKenna, chief market strategist at futures brokerage AxiTrader said the U.S. crude price support came “as the EIA inventory data showed a big draw in U.S. crude and a solid run rate of 98.1 percent for refineries”.

U.S. commercial crude oil inventories fell by 5.8 million barrels in the week to Aug. 17 to 408.36 million barrels, the Energy Information Administration (EIA) said on Wednesday.

In production, U.S. crude oil output rose back to 11 million barrels per day, the EIA report said.

That means the world’s three top producers, Russia, the United States and Saudi Arabia, now all churn out around 11 million bpd, meeting a third of global demand.

Oil steady on OPEC cuts, strong demand and looming Iran sanctions

CNBC

  • Oil prices held firm on strong demand and ongoing OPEC-led supply cuts.
  • Markets remained below multi-year highs from the previous day.
  • The crude oil price forward curve is in firm backwardation.

Oil

Lucy Nicholson | Reuters

Oil prices held firm on Friday on strong demand, ongoing supply cuts led by producer cartel OPEC and looming U.S. sanctions against major crude exporter Iran.

But markets remained below multi-year highs from the previous day as surging output from the United States is expected to offset at least some of the shortfalls.

Brent crude futures were at $79.48 per barrel at 0041 GMT, up 5 cents from their last close. Brent broke through $80 for the first time since November 2014 on Thursday.

U.S. West Texas Intermediate (WTI) crude futures were at $71.55 a barrel, up 6 cents from their last settlement.

Crude prices have received broad support from voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at tightening the market.

Helped by strong demand, especially in Asia, as well as a U.S. announcement earlier this month to renew sanctions against OPEC-member Iran, Brent has climbed 20 percent since the start of the year.

“Global inventories are approaching long-run averages, suggesting that the coordinated OPEC/non-OPEC supply cuts have been successful,” said Jack Allardyce, oil and gas research analyst at Cantor Fitzgerald.

$80 oil, friend or foe of the rally?

$80 oil, friend or foe of the rally?  

Despite this, he said he saw “little to drive benchmarks much higher in the immediate term (as) there is a building concern over demand growth, partially on account of higher prices.”

At $80 per barrel, Asia’s thirst for oil costs the region a whopping $1 trillion a year, more than twice what it was in 2015/2016, the two years prior to the OPEC-cuts which started in 2017.

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Longer-term

The crude oil price forward curve is in firm backwardation, a structure that suggests a tight market as prices for immediate delivery are higher than those for later dispatch.

Front-month Brent prices are now almost $1.80 per barrel more expensive than those for delivery in December.

“Longer-dated (crude) futures … remain in backwardation, driven by confidence in indefatigable U.S. shale producers,” U.S. firm Height Securities said in a note, although it warned that strong demand as well as looming disruptions due to renewed U.S. sanctions against Iran and falling output in Venezuela could soon start lifting the crude forward curve too.

U.S. crude oil production has soared by more than a quarter in the last two years, to a record 10.72 million barrels per day.

That puts the United States within reach of top producer Russia, which pumps around 11 million bpd.

As a result of its surging production, U.S. crude is increasingly appearing on global markets as exports.

Exxon’s Darren Woods will break from oil giant’s longstanding CEO silence on quarterly results

DALLAS NEWS

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Darren Woods is breaking with tradition to become the first Exxon Mobil Corp. CEO to sit in on quarterly conference calls with analysts. But it’s not happening until next year.

Woods, who rose to chief executive in early 2017, will participate in the Irving-based company’s fourth-quarter earnings call, typically in late January or early February, Vice President of Investor Relations Jeff Woodbury said Friday in a webcast. In the meantime, a member of his inner circle will answer questions on quarterly calls.

“We believe that the investment community did not have a very good understanding of what our value growth potential was,” Woodbury said Friday during a conference call. “We have taken an extra effort in order to engage with the investment community at all levels of the corporation.”

Exxon CEO Darren Woods(Melissa Repko/Staff)
Exxon CEO Darren Woods
(Melissa Repko/Staff)

For Exxon, the announcement represents a seismic shift in corporate culture as well as a bow to investors and analysts who have said they want more direct access to Woods. Typically Woodbury hosts the calls alone.

Neither of the CEO’s predecessors — Rex Tillerson and Lee Raymond — participated in the quarterly ritual during their combined 24 years leading the company.

The comments follow an earnings report that included the worst first-quarter output since the 1999 merger with Mobil and financial results that fell short of expectations. Exxon reported first-quarter earnings of $4.65 billion, which missed analysts’ estimates despite rapidly rising crude prices.

Crude oil prices are recovering after years of low prices weighing down revenue and profit for Exxon and its peers. Higher prices helped offset higher costs and a drop in production.

The company’s profit jumped 16 percent, with earnings of $1.09 a share, a nickel shy of projections on Wall Street, according to a poll by Zacks Investment Research.

Revenue rose 16.3 percent to $68.21 billion, which easily exceeded analyst expectations of $66.07 billion.

Crude prices are up about $8 per barrel since the beginning of the year.

“Increased commodity prices, coupled with a focus on operating efficiently and strengthening our portfolio, resulted in higher earnings and the highest quarterly cash flow from operations and asset sales since 2014,” Woods said in the earnings announcement.

The Associated Press and Bloomberg