Oil strengthens ahead of G20 meeting, but supply rise caps gains

CNBC

  • Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.
  • U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.
  • International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.

U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.

International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Both markets rose more than 1 percent in early Asian trade.

“We have seen huge increases in supply and the demand picture is in question. However, we might see some movement on global trade issues at the G20 meeting which starts on Friday,” said Michael McCarthy, chief strategist at CMC Markets and Stockbroking.

“I think we are seeing some positioning ahead of those potential demand-positive events.”

Investors in commodity markets are looking ahead to the meeting of leaders of the Group of 20 nations (G20), the world’s biggest economies, on Nov. 30 and Dec. 1, with the U.S.-China trade war at the top of the agenda.

U.S. President Donald Trump is open to a trade deal with China but is also prepared to hike tariffs on imports from the country if there is no breakthrough on longstanding trade issues during a dinner on Saturday with Chinese leader Xi Jinping, White House economic adviser Larry Kudlow said on Tuesday.

Xi said China will widen market access for foreign investors and step up protection of intellectual property rights.

Meanwhile, rising supplies are keeping a lid on prices.

U.S. crude inventories for the week to Nov. 23 added 3.6 million barrels to the most in a year at 450 million barrels, exceeding expectations, the Energy Information Administration said on Wednesday.

“WTI oil is now trading right around the $50 per barrel level, a price last seen well over a year ago, as the current oversupply situation has now manifested itself in 10 consecutive weekly increases in U.S. oil inventories,” said William O’Loughlin, Investment Analyst at Australia’s Rivkin Securities.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members will meet in Vienna, Austria on Dec. 6 to discuss a new round of production cuts of 1 million to 1.4 million barrels per day (bpd) and possibly more, OPEC delegates told Reuters earlier this month.

Oil prices rise on North Sea outage, ahead of OPEC, G20 meetings

CNBC

  • The Organization of the Petroleum Exporting Countries will meet at its headquarters in Vienna, Austria, on Dec. 6 to discuss output policy.

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Andrew Burton | Getty Images

Oil prices rose by one percent on Wednesday ahead of an OPEC meeting next week at which the producer club is expected to decide some form of supply cut to counter an emerging glut.

The shutdown of Britain’s largest North Sea oilfield for repairs also supported prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $52.11 per barrel at 0448 GMT, up 55 cents, or 1.1 percent from their last settlement.

International Brent crude oil futures were up 57 cents, or 1 percent, at $60.78 per barrel.

The Buzzard oilfield, which pumps about 150,000 barrels per day (bpd) has closed temporarily after the discovery of pipe corrosion. A smaller field linked to Forties, Total’s Elgin-Franklin, is also shut for maintenance. As a result, trade sources said three cargoes due to load in December had been cancelled.

Despite Wednesday’s rise, oil prices have still lost around 30 percent in value since early October, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

The crude oil price slump since October is so far on par with the 2008 price crash and steeper than that of 2014/2015.

The Organization of the Petroleum Exporting Countries (OPEC) will meet at its headquarters in Vienna, Austria, on Dec. 6 to discuss output policy.

The OPEC-meeting will follow a gathering by the Group of 20 (G-20) nations, which includes the world’s biggest economies, in Argentina this weekend, at which the Sino-American trade dispute as well as oil policy are expected to be discussed.

While most analysts expect some form of supply cut from the OPEC meeting, sentiment in oil markets remains negative.

“Options traders remain focused on downside risks following a 30 percent slide in WTI,” Erik Norland, senior economist at commodities exchange CME Group wrote in a note, referring to the higher number of traders who have placed positions that would profit from a further fall in crude prices than those placing bets on a rising market.

Portfolio managers have slashed their combined net long position in crude futures by a total of 607 million barrels over the last eight weeks, the largest reduction over a comparable period since at least 2013, when the current data series began, exchange data showed.

A concern to global markets is a slowdown in global trade as a result of the Sino-American trade dispute, swelling debt and a strong dollar that puts pressure on emerging markets.

The World Trade Organization (WTO) said in its latest outlook, published on Tuesday, that “trade growth is likely to slow further into the fourth quarter of 2018”, with growth likely at its slowest since Oct. 2016.

Oil weighed down by record Saudi output; markets await G20, OPEC meetings

CNBC

  • Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.
  • International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Ali Jarekji | Reuters
The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.

International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.

Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe.

Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda.

OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.

In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production.

Despite this, most analysts expect OPEC to start withholding supply again soon.

“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank.

“If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.

“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.

Oil prices fall on demand concerns as G20 warns of risks to growth

CNBC

  • Oil prices fell on Monday because of increasing concerns about fuel demand.
  • Finance ministers and central bank governors from the G20 warned that global economic growth risks have increased amid rising trade and geopolitical tensions.

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 prices fell on Monday because of increasing concerns about fuel demand after finance ministers and central bank governors from the G20 warned that global economic growth risks have increased amid rising trade and geopolitical tensions.

Brent crude dropped 10 cents, or 0.1 percent, to $72.97 a barrel by 0350 GMT. U.S. West Texas Intermediate (WTI) futures declined 8 cents, or 0.1 percent, to $68.18 a barrel.

Finance ministers and central bank governors ended the meeting of the Group of 20 largest economies in Buenos Aires over the weekend calling for more dialogue to prevent trade and geopolitical tensions from hurting growth.

“Global economic growth remains robust and unemployment is at a decade low,” the finance leaders said in a statement. “However, growth has been less synchronized recently, and downside risks over the short and medium term have increased.”

The talks occurred amid escalating rhetoric in the trade conflict between the United States and China, the world’s largest economies, which have so far slapped tariffs on $34 billion worth of each other’s goods.

U.S. President Donald Trump threatened on Friday to impose tariffs on all $500 billion of Chinese exports to the United States unless Beijing agrees to major structural changes to its technology transfer, industrial subsidy and joint venture policies.

“The impact of the trade war and the recognition that President Trump and his administration are serious about going to the mat on this issue is finally starting to register in the consciousness of traders and investors in oil and other financial markets,” said Greg McKenna, chief market strategist at AxiTrader.

Oil prices could be swayed by the Trump administration

Oil prices could be swayed by the Trump administration  

Economic growth and oil demand growth are closely correlated as expanding economies support fuel consumption for trade and travel as well as for automobiles.

U.S. energy companies last week cut the number of oil rigs by the most since March as the rate of growth has slowed over the past month or so with recent declines in crude prices.

Drillers cut 5 oil rigs in the week to July 20, bringing the total count down to 858, General Electric’s Baker Hughes energy services firm said in its closely followed report on Friday.

The U.S. rig count, an early indicator of future output, is higher than a year ago when 764 rigs were active as energy companies have been ramping up production in anticipation of higher prices in 2018 than previous years.

Hedge funds and money managers cut their bullish wagers on U.S. crude for the first time in nearly a month, a further sign of weaker sentiment for the market.

The speculator group cut their combined futures and options positions by 34,067 contracts to 423,650 in the week to July 17, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Most of the reduction occurred as money managers reduced their long position, or bets that oil prices would rise.