Oil prices drop on concerns about patchy demand recovery, record U.S. stocks

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures erased gains from Wednesday, falling as low as $38.42 a barrel. The benchmark contract was down 2.5%, or 99 cents, at $38.61 at 0211 GMT.
  • Brent crude futures fell 2.2%, or 92 cents, to $40.81 a barrel, also giving up gains from Wednesday.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Michael Heiman | Getty Images

Oil prices fell more than 2% on Thursday on worries about slow demand growth with coronavirus cases rising, U.S. crude stockpiles hitting an all-time high and the U.S. Federal Reserve projecting recovery from the pandemic would take years.

U.S. West Texas Intermediate (WTI) crude futures erased gains from Wednesday, falling as low as $38.42 a barrel. The benchmark contract was down 2.5%, or 99 cents, at $38.61 at 0211 GMT.

Brent crude futures fell 2.2%, or 92 cents, to $40.81 a barrel, also giving up gains from Wednesday.

U.S. crude inventories rose unexpectedly by 5.7 million barrels in the week to June 5 to 538.1 million barrels — a record — as imports were boosted by the arrival of supplies bought by refiners when Saudi Arabia flooded the market in March and April, data from the Energy Information Administration showed.

At the same time, gasoline stockpiles grew more than expected to 258.7 million barrels. Distillate stockpiles, which include diesel and heating oil, rose by 1.6 million barrels, but the increase was smaller than in previous weeks.

The market took a negative view on the stock build, even though there were signs of improving gasoline demand in the data, too, said Commonwealth Bank commodities analyst Vivek Dhar.

“Most of the (price) gains have come from when strict lockdowns were lifted. Coming back to where it was pre-COVID – that will take some time,” Dhar said.

“The key for markets to feel like the worst is over is: when will stockpiles peak globally. That’s what the market is paying attention to.”

Adding to the negative sentiment, the U.S. Federal Reserve said the world’s largest economy would shrink 6.5% this year and the unemployment rate would be at 9.3% at the end of 2020 in its first projections of the pandemic era.

“Short-term and fast money traders are very much inclined to sell outright or to take profits on any hint of bearish data,” said Stephen Innes, chief global market strategist at Axicorp.

In a further sign that recovery will continued to be overshadowed by the coronavirus, total U.S. cases topped 2 million on Wednesday, with new infections rising slightly after five weeks of declines, according to a Reuters analysis.

Oil rises on signs of firmer demand, fall in U.S. crude stocks

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Reuters
KEY POINTS
  • Brent crude futures for July delivery were up 23 cents, or 0.7%, at $34.88 per barrel at 0347 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures for July were up 14 cents, or 0.4%, at $32.10 a barrel.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
Michael Heiman | Getty Images

Oil prices rose on Wednesday amid signs of improving demand and a drawdown in U.S. crude inventories but worries over the economic fallout from the coronavirus pandemic capped gains.

Brent crude futures for July delivery were up 23 cents, or 0.7%, at $34.88 per barrel at 0347 GMT.

U.S. West Texas Intermediate (WTI) crude futures for July were up 14 cents, or 0.4%, at $32.10 a barrel. The July contract closed on Tuesday at $31.96, up 1%.

The June contract expired on Tuesday at $32.50 a barrel, up 2.1%, as the WTI futures market avoided the chaos of last month’s May expiry, when prices sank below zero.

Oil prices have mainly risen during the past three weeks, with both benchmarks climbing above $30 for the first time in more than a month on Monday, supported by massive output cuts by major oil producing countries and signs of improving demand.

U.S. crude inventories fell by 4.8 million barrels to 521.3 million barrels in the week to May 15, data from industry group the American Petroleum Institute (API) showed on Tuesday.

Refinery runs rose by 229,000 barrels per day, the API said, a sign that plants are trying to produce more fuel as the United States eases its lockdowns put in place to halt the spread of the novel coronavirus.

Official data from the Energy Information Administration (EIA) is due at 10:30 a.m. (1430 GMT) on Wednesday.

“Oil markets have worried about high crude inventories but yesterday the WTI June contract expired and rolled over to July smoothly as concerns over crude stocks ease and demand has improved in the short-term,” said Kim Kwang-rae, commodity analyst at Samsung Securities in Seoul.

Asia’s gasoline profit margins turned positive on Tuesday for the first in nearly two months, giving hope to global oil refiners.

But lingering concerns about the economic fallout from the coronavirus pandemic, especially in the United States which is the world’s biggest oil consumer, kept a lid on prices.

U.S. Federal Reserve Chair Jerome Powell said on Tuesday layoffs by state and local governments will slow the U.S. economic recovery, while Boston Federal Reserve Bank President Eric Rosengren said the U.S. unemployment rate is likely to stay at double-digit levels through the end of the year.

Oil prices rise as investors put hopes on China stimulus

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Reuters
KEY POINTS
  • Brent crude futures were up 24 cents, or 0.4%, at $60.85 a barrel by 0221 GMT, having fallen earlier in the session. They dropped by 1.6% on Wednesday.
  • U.S. West Texas Intermediate (WTI) crude futures were up by 10 cents, 0.2%, at $55.16 a barrel. They ended 0.9% lower the previous session.
GP: Sinopec oil China 190322
A man working in a filling station of Sinopec, China Petroleum and Chemical Corporation, in Shanghai, China, on March 22, 2018.
Johannes EIsele | AFP | Getty Images

Oil prices rose on Thursday as investors banked on more economic stimulus by China after weak PMI data, partly recovering from losses in the previous session on a surprise build in U.S. crude stocks.

Brent crude futures were up 24 cents, or 0.4%, at $60.85 a barrel by 0221 GMT, having fallen earlier in the session. They dropped by 1.6% on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were up by 10 cents, 0.2%, at $55.16 a barrel. They ended 0.9% lower the previous session.

Factory activity in China shrank for a sixth straight month in October, while growth in China’s services sector activity slowed to the lowest since February 2016, official data showed on Thursday.

“The move up in oil is driven by the expectation that more China stimulus is now on the way after the six-month low in the China manufacturing PMI,” said Jeffrey Halley, senior market analyst at OANDA.

“The kneejerk response …. was to sell commodities and energy, but central banks globally have itchy trigger fingers at the moment with regards to easing and I believe China will be no different,” he said.

The U.S. Federal Reserve on Wednesday cut interest rates for a third time this year with the Fed’s stance vouching for the durability of an economic expansion that is now the longest on record.

Rate cuts can often be bullish for oil prices because a stronger economy typically implies higher demand for crude.

Still, prices are likely to be capped until inventories start to show sustained declines.

Crude inventories rose 5.7 million barrels in the week to Oct. 25, the U.S. Energy Information Administration said on Wednesday, compared with analysts’ expectations for a 494,000-barrel build.

 

Oil prices eke out small gains ahead of Fed Chair speech

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Reuters
KEY POINTS
  • Brent crude rose 10 cents to $60.02 a barrel by 0118 GMT.
  • U.S. crude futures were at $55.38 a barrel, up 3 cents. Both contracts were on track for a second weekly gain.
RT: Oil operations Permian Basin near Midland, Texas 180823
Oil operations in the Permian Basin near Midland, Texas
Nick Oxford | Reuters

Oil prices clawed back the previous day’s losses on Friday, with Brent nudging above $60 a barrel, as tighter supplies from key producers offset slowing demand growth while investors await clues from the Federal Reserve on U.S. monetary policy.

Brent crude rose 10 cents to $60.02 a barrel by 0118 GMT, while U.S. crude futures were at $55.38 a barrel, up 3 cents. Both contracts were on track for a second weekly gain.

“Oil is set to trade quietly today as it’s all about the Jackson Hole (meeting) tonight,” Jeffrey Halley, a Singapore-based senior market analyst at brokerage Oanda.

“What we’re seeing is some profit-taking in Asia in very light volumes.”

A speech by Federal Reserve Chair Jerome Powell later on Friday at a meeting of central bankers in Jackson Hole is expected to provide some clues on whether the Fed will cut interest rates for a second time this year to boost the U.S. economy.

Traders’ expectations of further U.S. monetary easing were clouded by comments from two Fed officials who said on Wednesday that they do not see a case for a rate cut now.

A reduction in interest rates could strengthen the U.S. dollar against other currencies and make dollar-denominated oil more costly for investors.

Oil prices are down for nearly two straight months after the International Energy Agency and the Organization of Petroleum Exporting Countries cut demand growth forecasts as a simmering U.S.-China trade war hit global economic growth.

However, oil prices remained supported by production cuts from OPEC members and Russia while U.S. sanctions have sharply reduced exports from Iran and Venezuela.

Oil prices rise amid expectations that the US Federal Reserve will cut rates

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Reuters
KEY POINTS
  • Brent crude rose 33 cents, or 0.5%, to $64.04 a barrel by 0435 GMT, after gaining 0.4% the previous session.
  • U.S. crude was up 30 cents or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.
Reusable: Oil well site in Canada 150827
Dan Riedlhuber | Reuters

Oil prices rose for a fourth day on Tuesday on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than ten years, which should support economic and fuel demand growth in the world’s biggest oil user.

Brent crude rose 33 cents, or 0.5%, to $64.04 a barrel by 0435 GMT, after gaining 0.4% the previous session.

U.S. crude was up 30 cents or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.

So-called dovish monetary policy in the United States, where the central bank reduces interest rates, would “support a continuation in global expansionary activities and fuel demand growth” for the second half of 2019, Benjamin Lu, an analyst at Phillip Futures in Singapore, said in a note.

“If the Fed is a little more dovish and prices in a 75 basis points cut … we might see oil pushing up towards $60,” Lu said by phone, referring to U.S. crude.

Still, “demand side concerns are the shadow over oil prices,” he added.

U.S. central bankers will begin their two-day meeting later on Tuesday and are expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.

U.S. President Donald Trump said a small rate cut “is not enough.”

Economic growth in the United States slowed less than expected in the second quarter, strengthening the outlook for oil consumption but, elsewhere, disappointing economic data has increased concerns about slower growth.

U.S. and Chinese negotiators meet this week for their first in-person talks since agreeing to a truce to their trade dispute at the Group of 20 meeting last month, with some optimistic that the discussions will help bridge the gap between the world’s two largest economies and biggest oil consumers.

However, Trump said China might not want to sign a trade deal until after the 2020 U.S. election.

Supply risks are still a concern as tensions remained high around the Strait of Hormuz, through which about a fifth of the world’s oil passes.

Tensions spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the capture of an Iranian tanker by British forces near Gibraltar.