Oil steady on easing US-Iran tensions, eyes on China trade deal

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Reuters
KEY POINTS
  • Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.
  • Oil prices had surged after the killing of an Iranian commander by a U.S. drone strike and the launch of Iranian missiles in retaliation, but then slumped as the United States and Iran stepped back from the brink of direct conflict.
  • Meanwhile, expectations of thawing trade tensions between the United States and China, the world’s two biggest oil consumers, have offered support for prices.
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A damaged installation in Saudi Arabia’s Abqaiq oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices held steady on Monday as fears of conflict between the United States and Iran eased, with investors shifting their focus to this week’s scheduled signing of an initial U.S.-China trade deal, which could boost economic growth and demand.

Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.

Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander and Iran retaliated with missiles launched against U.S. bases in Iraq, but slumped again as Washington and Tehran retreated from the brink of direct conflict.

Global benchmark Brent touched $71.75 per barrel last week before ending on Friday below $65.

“The possibility of the war between the United States and Iran has disappeared … For the week, the signing of the U.S.-China trade deal would lift oil prices on expectations for higher demand,” said Kim Kwang-rae, a commodities analyst at Samsung Futures in Seoul.

Backwardation in Brent, a market structure where prices for near-term contracts are higher than those for later contracts, is currently at 72 cents per barrel, from 84 cent a week earlier, whereas the WTI backwardation is at 4 cents a barrel from 23 cents last week.

Backwardation tends to reflect tightening supplies, and the narrowing of the values indicate that worries over supply disruption are receding.

“The fundamentals for WTI remain weak for the coming months and stocks are expected to build at Cushing,” said Virendra Chauhan, an oil analyst at Energy Aspects in Singapore.

“For Brent, which is a broader indicator of the global crude market, it is a combination of supply and demand,” he added.

“Sentiment appears to have turned a corner on the trade-war front, while some green shoots regarding industrial activity and the start of fiscal stimulus, could mean demand surprised to the upside.”

A U.S.-China trade deal is due to be signed in Washington on Wednesday.

Oil prices fall further as threat of Middle East war recedes

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Reuters
KEY POINTS
  • Brent crude fell 20 cents, or 0.3%, at $65.17 by 0240 GMT, and is heading for its first decline in six weeks, down 5%.
  • WTI was down 20 cents, or 0.3%, at $59.36 and also on track for a first weekly drop in six, nearly 6% from last Friday’s close based on the latest prices.
  • Oil is now below where it was before a U.S. drone strike killed a top Iranian general on Jan. 3.
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Oil pump jacks pump oil in Al-Jbessa oil field in Al-Shaddadeh town of Al-Hasakah governorate April 2, 2010.
Stringer | Reuters

Oil prices dropped on Friday extending days of losses as the threat of war in the Middle East receded and investors  switched attention to economic growth prospects and the rise in U.S. crude oil and product inventories.

Brent crude fell 20 cents, or 0.3%, at $65.17 by 0240 GMT, and is heading for its first decline in six weeks, down 5%. WTI was down 20 cents, or 0.3%, at $59.36 and also on track for a first weekly drop in six, nearly 6% from last Friday’s close based on the latest prices.

Oil is now below where it was before a U.S. drone strike killed a top Iranian general on Jan. 3, with Iran responding with a ballistic missile attack on Iraqi air bases hosting U.S. forces this week that left no casualties.

“Although markets are rightly pricing in a lower risk of … supply-side disruptions in the Middle East, we still think there remains some ongoing risk to output from geopolitical issues in the region,” J.P.Morgan said in a commodities note.

A Ukrainian airliner that crashed in Iran in the early hours of Wednesday after Iran launched the attacks on the bases in Iraq, was likely brought down by an Iranian missile, Canada’s Prime Minister Justin Trudeau said on Thursday.

All the nearly 180 passengers on board the Ukraine International Airlines flight to Kiev from Tehran died in the crash. Iran denied it was hit by a missile.

For now though oil investors are focusing on areas away from the conflict.

Crude stocks in the world’s biggest producer rose against forecast last week and gasoline inventories were up by the most in a week in four years, the U.S. Energy Information Administration said on Wednesday.

“There’s too much supply out there,” a Japan-based based oil executive told Reuters.

Oil rises after rocket attack in Baghdad shakes investor confidence

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Reuters
KEY POINTS
  • Oil prices climbed on Thursday after a rocket attack on Baghdad triggered fresh concern over the potential for conflict in the Middle East.
  • Brent crude futures rose 43 cents, or 0.7%, to $65.87 a barrel by 0109 GMT, after seesawing through Wednesday to end with a 4.1% tumble.
  • West Texas Intermediate futures added 61 cents, or 1%, to $60.22 after falling nearly 5% in the previous session.
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A worker is seen at the new CPF3 oil station in the Halfaya oilfield in southern of Maysan province, Halfaya, Iraq December 12, 2018.
Essam al-Sudani | Reuters

Oil prices climbed on Thursday after a rocket attack on Baghdad triggered fresh concern over the potential for conflict in the Middle East, a day after markets were roiled by an Iranian missile strike on Iraqi bases hosting U.S. forces.

But gains were muted as Washington and Tehran looked to defuse a crisis in the crude-producing region.

Brent crude futures rose 43 cents, or 0.7%, to $65.87 a barrel by 0109 GMT, after seesawing through Wednesday to end with a 4.1% tumble. They are now a little down on prices before the Jan. 3 killing of Iranian military commander Qassem Soleimani in a U.S. drone attack that sparked the crisis.

West Texas Intermediate futures added 61 cents, or 1%, to $60.22 after falling nearly 5% in the previous session.

In Thursday’s attack, two rockets fell on Baghdad’s Green Zone, which houses foreign missions and government buildings. There were no casualties, and no immediate claim of responsibility, but the strike served as a reminder that the region remains on tenterhooks.

“We need to be guarded about further sharp declines this week, as we will probably see more activity by proxy militias in Iraq,” said Stratfor oil analyst, Greg Priddy.

Still, he said, “our view remains that in the absence of actual losses from conflict with Iran, the market will see mild downward pressure in Q1 on inventory builds.”

That pressure was evident on Thursday as a result of a surprise build in U.S. crude stockpiles last week.

Crude oil stocks were up by 1.2 million barrels in the week ended Jan. 3 to 431.1 million barrels, against analysts’ forecasts in a Reuters poll for a 3.6 million-barrel drop.

Meanwhile, J.P. Morgan maintained its forecast for Brent to average $64.50 a barrel this year.

“The impact on oil prices will depend on (the) extent of supply disruption versus available spare capacity, global oil inventories and reaction to oil price from U.S. producers,” the bank said in a commodities research note.

Oil tumbles as investors rethink Mideast disruption risk

Reuters

SINGAPORE (Reuters) – Oil prices on Tuesday surrendered some gains made over the previous two days as investors reconsidered the likelihood of Middle East supply disruptions in the wake of the United States killing a top Iranian military commander.

Brent crude LCOc1 fell as much as 1.5% to $67.86 a barrel and was at $68.39, down 52 cents, at 0737 GMT. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $62.85, down 42 cents, after earlier dropping 1.5% to an intra-day low of $62.30.

Prices surged during the previous two sessions, with Brent reaching its highest since September while WTI rose to the most since April. The gains followed fears of escalating conflict and potential Middle East supply disruptions after the Jan. 3 drone strike in Baghdad that killed Iran’s Qassem Soleimani. But, some analysts have tempered expectations for a widespread conflict.

“The market’s clearly worried about the potential for supply disruption but there’s no obvious path forward from here,” said Lachlan Shaw, head of commodity research at National Australia Bank.

“It’s all a matter of scenarios that may impact oil production or not, so the market seems to have recalibrated in the last 24 to 36 hours on some of those likelihoods.”

He added that Iran will need foreign currency earnings from continued oil exports and it will be counter to their interest if they try to block the Straits of Hormuz. Roughly 20% of the world’s oil passes the Middle East waterway, which borders Iran.

Consultancy Eurasia Group said Iran is likely to focus more narrowly on U.S. military targets instead of energy targets.

“That’s not to say it won’t continue low-level harassment of commercial shipping or regional energy infrastructure but these activities will not be severe,” it added.

Prices fell despite higher compliance among the Organization of the Petroleum Exporting Countries (OPEC) on meeting production quota curbs aimed at reducing supply.

OPEC members pumped 29.50 million barrels per day (bpd) last month, down 50,000 bpd from November’s revised figure, according to a Reuters survey published on Monday.

“We still believe in the absence of retaliation or disruptions, that oil prices will trend lower over the course of 1Q20, with the market remaining well supplied over the first half of 2020,” ING analysts said in a note.

U.S. crude oil stockpiles likely dropped last week for a fourth week in a row as exports ramped up although refined products stocks were expected to rise, a Reuters poll showed on Monday.

Six analysts estimated, on average, that crude stocks fell by 4.1 million barrels in the week to Jan 3.

Even before Soleimani’s death, investors were increasing their bullish WTI holdings, with money managers raising their net-long positions in the week to Dec. 31, the Commodity Futures Trading Commission said on Monday.

Reporting by Florence Tan; Editing by Kenneth Maxwell and Christian Schmollinger

Brent jumps nearly $3 after US air strike kills Iran, Iraq officials

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Reuters
KEY POINTS
  • Brent crude futures jumped nearly $3 to hit a high of $69.16 a barrel, the highest since Sept. 17.
  • U.S. West Texas Intermediate (WTI) crude futures rose $1.76, or 2.9%, to $62.94 a barrel.
  • An air strike at the Baghdad International Airport early on Friday killed Iranian Major-General Qassem Suleimani, head of the elite Quds Force, and Iraqi militia commander Abu Mahdi al-Muhandis, an Iraqi militia spokesman told Reuters. The Pentagon later confirmed it was a U.S. air strike that killed Suleimani.
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Jean-Paul Pelissier | Reuters

Brent crude futures jumped close to $3 on Friday to their highest since September after a U.S. air strike killed key Iranian and Iraqi military personnel, raising concerns that escalating Middle East tensions may disrupt oil supplies.

Brent crude futures jumped nearly $3 to hit a high of $69.16 a barrel, the highest since Sept. 17. The front-month Brent March contract was at $68.25 a barrel, up $2.00, or 3%, by 0258 GMT.

U.S. West Texas Intermediate (WTI) crude futures rose $1.76, or 2.9%, to $62.94 a barrel. Earlier, it touched $63.84 a barrel, highest since May 1.

“The supply side risks remain elevated in the Middle East and we could see tensions continue to elevate between the U.S. and Iran-backed militia in Iraq,” said Edward Moya, analyst at brokerage OANDA, in an e-mail to Reuters.

An air strike at the Baghdad International Airport early on Friday killed Iranian Major-General Qassem Suleimani, head of the elite Quds Force, and Iraqi militia commander Abu Mahdi al-Muhandis, an Iraqi militia spokesman told Reuters.

The Pentagon later confirmed it was a U.S. air strike that killed Suleimani.

Oil prices were also lifted by China’s central bank saying on Wednesday it was cutting the amount of cash that banks must hold in reserve, releasing around 800 billion yuan ($115 billion) in funds to shore up the slowing Chinese economy.

This came shortly after data showed China’s production continued to grow at a solid pace and business confidence shot up.

“Oil prices still have room for further upside as many analysts are still having to upgrade their demand forecasts to include a rather calm period on the trade front,” Moya said, referring to the warming trade relation between China and the United States.

“President Trump is likely to take a break on being ‘tariff man’ until we get beyond the presidential election in November.”