Oil slips as focus shifts from Saudi supply to global demand concerns

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Reuters
KEY POINTS
  • Brent crude futures fell 35 cents to $64.42 a barrel by 0408 GMT.
  • U.S. West Texas Intermediate (WTI) futures  were at $58.36, down 28 cents.
GP: Rosneft oil refinery Russia 190125
A general view of the Novokuibyshev Refinery owned by Rosneft oil company on March 15, 2012 in Novokuibyshevsk, Samara region, Russia.
Sasha Mordovets | Getty Images

Oil prices eased on Tuesday as weak manufacturing data from Europe and Japan focused market attention on the gloomy outlook for demand and away from uncertainty around supply disruptions in Saudi Arabia.

Brent crude futures fell 35 cents to $64.42 a barrel by 0408 GMT, while U.S. West Texas Intermediate (WTI) futures were at $58.36, down 28 cents.

“The demand side of the equation is back in focus,” said Michael McCarthy, senior market analyst at CMC Markets in Sydney, pointing to sluggish manufacturing numbers in leading economies in Europe as well as Japan.

“That’s why we’re seeing a little bit more (downward) pressure on Brent than West Texas at the moment.”

Still, oil prices remained at comparatively elevated levels for the year in the wake of the Sept. 14 attack on Saudi Arabia’s largest oil processing facility that halved output in the world’s top oil exporter.

Reuters reported that Saudi Arabia has restored more than 75% of crude output lost after the attacks on its facilities and will return to full volumes by early next week. But the Wall Street Journal reported on Monday that repairs at the plants could take months longer than anticipated.

“Nine days after the oil facility attack in Saudi Arabia (SA), we still see divergent market views on when the damaged supplies will be restored,” analysts at Nomura said in a note.

“While the damaged plants may be repaired in the next couple of weeks, increasing actual oil supplies may require monitoring.”

European powers — Britain, Germany and France — backed the United States in blaming Iran for the Saudi oil attack, urging Tehran to agree to new talks with world powers on its nuclear and missile programs and regional security issues.

Meanwhile a preliminary Reuters poll found on Monday that U.S. crude oil and distillate stockpiles were expected to have dropped last week.

Seven analysts polled by Reuters estimated, on average, that crude inventories fell 800,000 barrels in the week to Sept. 20.

The poll was conducted ahead of key reports from the American Petroleum Institute, an industry group, to be released on Tuesday and from the Energy Information Administration on Wednesday.

Middle East tensions lift oil prices more than 1%

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Reuters
KEY POINTS
  • Brent crude futures touched an intra-day high of $65.50 a barrel, but eased to $64.97, up 69 cents by 2323 GMT.
  • U.S. West Texas Intermediate crude futures were at $58.78 a barrel, up 69 cents, after earlier hitting a high of $59.39.
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Richard I’Anson | Lonely Planet Images | Getty Images

Oil prices gained more than 1% to hit their highest levels in two sessions at the start of Monday’s trade as Middle East tensions remained elevated, supporting prices.

The Pentagon has ordered additional troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defenses following an attack on Saudi oil facilities.

U.S. Secretary of State Mike Pompeo said on Sunday that the troops are for “deterrence and defence” and Washington aimed to avoid war with Iran.

Brent crude futures touched an intra-day high of $65.50 a barrel, but eased to $64.97, up 69 cents by 2323 GMT.

U.S. West Texas Intermediate crude futures were at $58.78 a barrel, up 69 cents, after earlier hitting a high of $59.39.

In the United States, the impact of Tropical Storm Imelda on refineries in Texas has eased as Exxon Mobil and Valero restarted their crude processing units over the weekend.

Oil prices march to biggest weekly gain in months amid Middle East tensions

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Reuters
KEY POINTS
  • Brent crude is on track to rise about 7.7% this week. The front-month November contract was at $64.96 a barrel, up 56 cents, by 0212 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 66 cents to $58.79 a barrel.
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Pumpjacks in an oil field.
Paul Giamou | Aurora | Getty Images

Oil prices were on track for a more-than-7% jump this week, their biggest in months, as early trading on Friday saw gains extended on fresh tensions in the Middle East after a key Saudi Arabian supply hub was knocked out in an attack last weekend.

Friday’s rises came after a Saudi-led coalition launched a military operation north of Yemen’s port city of Hodeidah, as the United States worked with Middle East and European nations to build a coalition to deter Iranian threats after the Saudi attack.

Brent crude is on track to rise about 7.7% this week, the biggest weekly gain since January. The front-month November contract was at $64.96 a barrel, up 56 cents, by 0212 GMT.

U.S. West Texas Intermediate (WTI) crude futures were up 66 cents to $58.79 a barrel, set to post a 7.1% gain for the week, the largest weekly rise since June.

“The forward curve remains ‘bid’ as traders are hedging that the initial estimates for the duration of repairs (at damaged Saudi facilities), given the complex nature, could well underestimate the time required,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Saudi Arabia’s production dropped by almost half after an attack on Saturday crippled a major oil processing facility. Its oil minister has pledged to restore lost production by the end of this month, and bring capacity back to 12 million barrels per day by the end of November.

The United States and Saudi Arabia blames Iran for the assault on Saudi oil facilities. Tehran denies any involvement.

In the United States, meanwhile, torrential rain from Tropical Storm Imelda has forced a major refinery to cut production and shut a key oil pipeline, terminals and a ship channel in Texas.

Global markets are also keeping an eye on U.S.-China trade negotiations in Washington, as officials from both sides resumed face-to-face talks for the first time in nearly two months on Thursday.

Oil slips after Saudi Arabia says to restore output but risks remain

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Reuters
KEY POINTS
  • Brent crude oil futures fell 15 cents, or 0.2%, to $64.40 a barrel by 0253 GMT, after tumbling 6.5% the previous session.
  • U.S. West Texas Intermediate (WTI) crude futures declined 35 cents, or 0.6%, to $58.99 a barrel, after sinking by 5.7% on Tuesday.
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Foreign “guest workers” drill at the Saudi Aramco oil field complex facilities on March 2003 in Shaybah, Saudi Arabia.
Reza | Getty Images

Oil prices slipped on Wednesday, extending losses from the previous session after Saudi Arabia’s energy minister said the kingdom will restore lost oil production by the end of the month.

But investors remained cautious about Middle East tension after the United States said it believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran. Iran has denied involvement in the strikes.

Brent crude oil futures fell 15 cents, or 0.2%, to $64.40 a barrel by 0253 GMT, after tumbling 6.5% the previous session.

U.S. West Texas Intermediate (WTI) crude futures declined 35 cents, or 0.6%, to $58.99 a barrel, after sinking by 5.7% on Tuesday.

“The risk of further escalation of conflict in the Middle East remains over the energy market and wild swings will likely resume when we see tit-for-tat responses from a Saudi-U.S. led coordinated effort,” said Edward Moya, senior market analyst at OANDA in New York.

“The situation with the oil market will remain tense, but the initial fears of a sustained disruption with world oil supplies have been alleviated in the very short-term.”

Saudi Arabia sought to reassure markets after the attack on Saturday halved its oil output, saying on Tuesday that full production would be restored by month’s end.

Energy Minister Prince Abdulaziz bin Salman said on Tuesday that average oil production in September and October would be 9.89 million barrels per day and that the world’s top oil exporter would ensure full oil supply commitments to its customers this month.

Saudi Aramco has informed some Asian refiners that it will supply full allocated volumes of crude oil in October, albeit with some changes.

Relations between the United States and Iran have deteriorated since U.S. President Donald Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

Tehran rejects the charges it was behind the strikes and on Tuesday ruled out talks with Trump.

Shell Petroleum Development Company of Nigeria declared force majeure on exports of Bonny Light crude oil, which put a floor on price losses on Wednesday.

In a note late on Tuesday, BNP Paribas’ Harry Tchilinguirian said “In view of the vulnerability of Saudi’s supply chain and the likelihood that such attacks could be repeated in the future, we expect the market to reprice the geopolitical risk premium in oil.”

But Moya said oil prices “will continue to struggle to maintain any sustained rally as global growth weakness continue to drive demand concerns”.

U.S. crude inventories rose by 592,000 barrels in the week ended Sept. 13 to 422.5 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a decrease of 2.5 million barrels.

Official U.S. government data will be released on Wednesday.

Oil falls but prices still elevated after attacks on Saudi facilities

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Reuters
KEY POINTS
  • Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT.
  • West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.
  • Attacks on Saudi oil facilities heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages.
  • Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.
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Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019.
Fayez Nureldine | AFP | Getty Images

Oil fell more than 1% on Tuesday as the market hung on tenterhooks over the threat of a military response to attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half and sent prices soaring by the most in decades.

The Saturday attack heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages. Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.

Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT, and West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.

Prices surged nearly 20% in intra-day trading on Monday in response to the attacks, the biggest jump in almost 30 years, before closing around 15% higher.

Equities and other markets were also pressured on Tuesday.

“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

“However, the (geopolitical) risk premium … which has been basically ignored by markets in favour of growth worries in recent months, is likely to be priced in going forward,” she said.

A gauge of oil-market volatility on Monday rose to the highest level since December of last year, and trading activity showed investors expect higher prices in coming months.

Japan said on Tuesday it would consider a coordinated release of oil reserves if necessary.

U.S. President Donald Trump said on Monday it looked like Iran was behind attacks on the Saudi oil facilities but stressed he did not want to go to war.

Tehran has rejected the charges that it was behind the drone strikes.

Relations between the United States and Iran have deteriorated since Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

Washington also wants to pressure Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.

“With the U.S. ‘locked and loaded’ awaiting signs from Saudi Arabia that Iran was involved, tensions in the Middle East could get worse before they get better. Under these circumstances, the price of oil could remain elevated for some time yet,” City Index analyst Fiona Cincotta said.

“However, let’s not also forget that the demand picture isn’t great right now, which will dampen the oil price quickly. Most recently China’s industrial production figures disappointed overnight,” Cincotta said.

The attack on state-owned producer Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais cut its output by 5.7 million barrels a day and threw into question its ability to maintain oil exports.

The company has not given a specific timeline for the resumption of full output.