Oil rises on short-covering despite growing fears over coronavirus

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Reuters
KEY POINTS
  • Brent crude rose 42 cents, or 0.8%, to $55.37 a barrel by 0154 GMT.
  • U.S. West Texas Intermediate crude gained 43 cents, or 0.9%, to $50.33 a barrel.
  • Still, both benchmarks are down nearly 7% since last Thursday’s close.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Crude prices edged up on Wednesday as investors covered short positions after three sessions of losses, even as fears deepened that the rapid spread of the coronavirus will lead to a global pandemic.

Brent crude rose 42 cents, or 0.8%, to $55.37 a barrel by 0154 GMT, while U.S. West Texas Intermediate crude gained 43 cents, or 0.9%, to $50.33 a barrel. Still, both benchmarks are down nearly 7% since last Thursday’s close.

Fears of a pandemic escalated after the coronavirus spread to more countries, while Iran’s virus death toll rose to 16, the highest outside China, and infections worsened in South Korea and Italy.

In the United States, the Centers for Disease Control and Prevention said Americans should prepare for possible community spread of the virus.

“Investors unwound short positions after WTI dipped below a key support level of $50, as they have done a few times earlier this month,” said Hideshi Matsunaga, analyst at Sunward Trading.

“The reduction in Libya’s output and expectations for additional production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ are also lending support,” he said.

Oil output in Libya has fallen sharply since Jan. 18 because of a blockade of ports and oil fields by groups loyal to eastern-based commander Khalifa Haftar.

OPEC and its allies including Russia, a group known as OPEC+, are due to meet in Vienna over March 5-6.

Saudi Arabia’s energy minister said on Tuesday he was confident that OPEC and its partners would respond responsibly to the spread of the coronavirus.

Still, lingering worries that the rapidly spreading coronavirus will dent the global economy and oil demand are weighing on investor sentiment.

The International Energy Agency’s (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.

U.S. crude inventories are expected to rise for a fifth week running. The American Petroleum Institute (API) said late Tuesday that crude stockpiles rose 1.3 million barrels last week. Government data due at 10:30 a.m. EST (1530 GMT) on Wednesday was expected to show a 2 million-barrel rise, according to a Reuters poll.

Meanwhile, the United States is preparing to impose more sanctions on Venezuela’s oil sector, President Donald Trump said on Tuesday, in an attempt to choke financing to President Nicolas Maduro’s government.

Brent oil prices rise above $60, buoyed by U.S. stock drawdown

SINGAPORE (Reuters) – Brent crude oil futures rose above $60 a barrel on Wednesday after industry data showed a larger-than-expected drop in U.S. crude inventories, but ongoing worries about a possible global recession capped gains.

Brent crude LCOc1 had gained 33 cents, or 0.6%, to $60.36 a barrel by 0654 GMT, after settling 0.5% higher on Tuesday.

U.S. crude CLc1 was up 17 cents, or 0.3%, at $56.30 a barrel.

U.S. crude oil stocks fell by 3.5 million barrels in the week to Aug. 16, data from industry group the American Petroleum Institute (API) showed on Tuesday. Analysts polled by Reuters had expected a fall of 1.9 million barrels.

“Crude prices should see support from a bullish API stockpile report that could signal the largest Cushing draw since February 2018, if the EIA validates it,” said Edward Moya, senior market analyst at OANDA in New York.

Inventory numbers from the government’s Energy Information Administration (EIA) are due at 10:30 a.m. EDT (1430 GMT) on Wednesday, and will be more closely watched than usual given the nearing of the end of peak U.S. driving season, analysts said.

“With Canadian heavy crude restrictions being extended, we should see U.S. refiners … struggle to fill the void from lowered shipments from Mexico and Venezuela,” Moya said, referring to the Canadian province of Alberta extending mandatory curtailments on crude production by an extra year.

Tensions in the Middle East remained in the spotlight as U.S. Secretary of State Mike Pompeo said on Tuesday that the United States would take every action it can to prevent an Iranian tanker in the Mediterranean from delivering oil to Syria in contravention of U.S. sanctions.

Oil prices were also supported by data showing lower exports in June from Saudi Arabia, the world’s top oil exporter.

Saudi Arabia plans to keep its crude exports below 7 million barrels per day (bpd) in August and September despite strong demand from customers, to bring the market back to balance, a Saudi oil official told Reuters earlier this month.

But uncertainty over the global economic outlook amid the U.S.-China trade war capped gains in the oil markets.

“The trade-related tug of war in the oil market will probably extend until we get some semblance of clarity from the next round of U.S.-China trade discussion,” Stephen Innes, managing partner, VM Markets, said in a note.

Traders are also waiting for this week’s annual U.S. central bank seminar at Jackson Hole, where comments from Federal Reserve Chief Jerome Powell will be in focus.

“The biggest risk to crude prices is if Powell disappoints at Jackson Hole and doesn’t signal more easing will be coming,” said OANDA’s Moya.

Reporting by Jessica Jaganathan; Editing by Joseph Radford and Tom Hogue

Oil prices tread water as market eyes global risks

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Reuters

KEY POINTS
  • Brent crude futures were down 3 cents by 0300 GMT at $64.20.
  • U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.
Reusable: Oil storage refinery Australia Caltex Oil 141014
Jason Reed | Reuters

Crude prices were little changed on Monday as traders weighed geopolitical risks against the impact of the Sino-U.S. trade war on the global economy, although last week’s better-than-expected U.S. jobs data offered some support.

Brent crude futures were down 3 cents by 0300 GMT at $64.20. U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.

“A very cautious open this morning supported by a better than expected (non-farm payrolls),” said Stephen Innes, managing partner at Vanguard Markets in Bangkok. “Traders remain incredibly cautious about the dimmer global economic overhang.”

Both oil benchmarks fell last week as concerns about a slowing global economy outweighed risks to supply. Brent fell more than 3% and WTI shed more than 1.5%.

U.S. job growth rebounded strongly in June, with government payrolls surging, the Labor Department’s closely watched employment report showed on Friday, suggesting May’s sharp slowdown in hiring was probably a one-off.

Employers added 224,000 jobs last month, the most in five months, the report showed.

But the U.S.-China trade war has dampened prospects of global economic growth and oil demand.

The lack of concrete progress in resolving the acrimonious trade war between the United States and China, however, means the bar could be very high for the U.S. Federal Reserve not to lower borrowing costs at its July 30-31 policy meeting.

White House Economic advisor Larry Kudlow has confirmed top representatives from the United States and China will meet in the coming week to continue trade talks.

Still, Japan’s core machinery orders fell for the first time in four months in May, posing the biggest monthly drop in eight months in a worrying sign that global trade tensions are taking a toll on corporate investment.

Oil received some support from simmering tensions over Iran and after an extension last week to output cuts by OPEC and its allies.

Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from U.S. President Donald Trump, who pulled out of the pact last year.

“Geopolitical risks remain plentiful, but the start of the week could see Iran worries ease,” said Edward Moya, senior market analyst at OANDA.

Meanwhile, U.S. energy companies this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Oil slips on economic worries, but still set for strong weekly gain

CNBC

  • Both Brent and U.S. crude futures slipped.
  • Despite Friday’s price falls, Brent and WTI are set for weekly gains of more than 7 and 8 percent respectively.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil slipped on Friday amid concerns over the outlook for the global economy, but output cuts agreed by major exporters underpinned crude prices and kept markets on track for a strong weekly climb.

International Brent crude futures were at $61.55 per barrel at 0333 GMT, down 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures dropped 7 cents, or 0.1 percent, to $52.52 per barrel.

Traders said the declines came on lingering concerns over the health of the global economy.

“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” said Hue Frame, portfolio manager at Frame Funds in Sydney.

Most analysts have downgraded their global economic growth forecasts below 3 percent for 2019, with some even fearing a looming recession amid trade disputes and spiralling debt.

For now, however, there is hope that the trade war between Washington and Beijing may be resolved as global markets, including oil, took heart from talks between the two sides this week.

Despite Friday’s price falls, Brent and WTI are set for weekly gains of more than 7 and 8 percent respectively.

Beyond global economics, oil markets are receiving support from supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at reining in a glut that emerged in the second-half of 2018.

A key reason for the emerging glut was the United States where crude oil production soared by more than 2 million barrels per day (bpd) in 2018 to a record 11.7 million bpd.

Consultancy JBC Energy this week said it was likely that U.S. crude oil production was already “significantly above 12 million bpd” by January 2019.

Given the overall supply and demand balance, Swiss bank Julius Baer said it was “price neutral” in its oil forecast.

“We see the oil market as well balanced into the foreseeable future, as the petro-nations make space for further U.S. shale production growth,” said Norbert Ruecker, head of commodity research at the bank.

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

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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