Oil prices steady as U.S. crude inventories fall, but trade tensions weigh

CNBC

  • U.S. crude inventories fall to Feb-2015 low of 401.49 million barrels.
  • But diesel, gasoline stocks rise after lackluster driving season.
  • Trade tensions weigh on markets.
  • U.S. crude oil production at 11 million barrels per day.

Oil prices held steady on Friday, as the market balanced a fall in U.S. crude inventories to the lowest levels since 2015, with Sino-American trade tensions and economic weakness from emerging markets.

U.S. West Texas Intermediate (WTI) crude futures were at $67.78 per barrel at 0448 GMT, up just 1 cent from their last settlement.

International Brent crude futures dipped 8 cents to $76.42 a barrel.

“Oil inventory data released last night showed a larger-than-expected draw in crude inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to Aug. 31, the lowest since February 2015, U.S. Energy Information Administration (EIA) data showed on Thursday.

Despite that, analysts said prices were curbed by a rise in refined product stocks and a relatively weak U.S. peak fuel consumption season this summer, known as the driving season.

Gasoline stocks rose by 1.8 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 3.1 million barrels, the EIA data showed.

“U.S. gasoline inventories are now above the top of the 5-year range,” said U.S. investment bank Jefferies in a note on Friday.

“The U.S. summer driving season has proven to be a lacklustre one in terms of gasoline demand,” said O’Loughlin of Rivkin Securities.

Ongoing emerging market weakness as well as potential new U.S. import tariffs on Chinese goods were also weighing on oil market sentiment.

“Emerging markets, which tend to have a higher energy intensity of GDP, are an obvious concern,” said Jefferies.

Asian shares slipped to a 14-month trough on Friday as investors feared a new round of Sino-U.S. tariffs, while currencies from Indonesia to India also remained under pressure.

On the supply side, U.S. crude oil production last week remained at a record 11 million barrels per day (bpd), a level it has largely been at since July.

After rising by almost a third in the last two years, Jefferies said: “U.S. production growth will now significantly decelerate until 4Q19.”

Outside the United States, U.S. sanctions against major oil producer Iran, which from November will target oil exports, are fueling expectations of a tighter market towards the end of the year.

“The main driver of oil prices, in our view, remains the re-imposition of U.S. … sanctions against consumers of Iranian oil,” said Standard Chartered this week.

“There is still considerable uncertainty over the strategies of China and India, Iran’s main customers.”

Washington has indicated it may offer temporary sanctions waivers to allied countries that are unable to immediately cease imports from Iran.

U.S. oil prices rise as Gulf platforms shut ahead of hurricane

CNBC

  • Storm Gordon to make U.S. landfall as hurricane.
  • Brent dips as India takes steps to continue Iran imports.
  • Global oil markets have tightened since 2017 — Barclays.

U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.05 per barrel at 0353 GMT, up 25 cents, or 0.4 percent from their last settlement.

Anadarko Petroleum Corp said on Monday it had evacuated and shut production at two oil platforms in the northern Gulf of Mexico ahead of the approach of Gordon, which is expected to come ashore as a hurricane.

International Brent crude futures, by contrast, lost ground, trading at $78.07 per barrel, down 8 cents from their last close.

This came as India allowed state refiners to import Iranian oil if Tehran arranges and insures tankers.

Many international shippers have stopped loading Iranian oil as U.S. financial sanctions against Tehran prevents them from insuring its cargoes.

Mirroring a step by China, where buyers are shifting nearly all their Iranian oil imports to vessels owned by National Iranian Tanker Co (NITC), this means that Asia’s two biggest oil importers are making plans to continue Iran purchases despite pressure by Washington to cut orders.

Traders said Brent was also pressured by emerging market turmoil and the strong dollar, which makes crude imports for countries using other currencies more expensive.

Changing market

Britain’s Barclays bank said on Tuesday that oil markets had changed since 2017 when worries about rising supply were more evident.

“U.S. producers are resisting temptation and exercising capital discipline, OPEC and Russia have convinced market participants they are managing the supply of over half of global production, the U.S. is using sanctions more actively, and several key OPEC producers are at risk of being failed states,” Barclays said.

Crude oil “prices could reach $80 and higher in the short term”, the bank said, although it added that despite these developments global supply may exceed demand next year.

For 2020, Barclays said it expects Brent to average $75 per barrel, up from its previous forecast of just $55 a barrel.

French bank BNP Paribas struck a similar tone, warning of “supply issues” for the rest of the year and into 2019.

“Crude oil export losses from Iran due to U.S. sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in OPEC+ production due to market share sensitivities,” the bank said.

BNP Paribas expects Brent to average $79 per barrel in 2019.