Oil falls on supply glut fears as OPEC+ set to boost output

CNBC

REUTERS
KEY POINTS
  • Brent crude futures slid 26 cents, or 0.6%, to $43.26 a barrel by 0253 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were down 29 cents, or 0.7%, at $39.98 a barrel.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices fell on Monday on oversupply concerns as OPEC and its allies wind back production cuts in August and a rise in worldwide COVID-19 cases points to a slower pick-up in fuel demand.

Brent crude futures slid 26 cents, or 0.6%, to $43.26 a barrel by 0253 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 29 cents, or 0.7%, at $39.98 a barrel.

Brent posted a fourth month of gains in July and U.S. crude posted a third as both rose from depths hit in April, when much of the world was in lockdown due to the coronavirus pandemic.

“Investors are worried about oversupply as the OPEC+ is due to start reducing production cuts this month and a recovery in oil prices from record lows is likely to encourage U.S. shale producers to ramp up output,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

“Also, fears over a resurgence in the coronavirus cases are weighing on oil markets,” he said.

Oil output by the Organization of the Petroleum Exporting Countries rose by over 1 million barrels a day in July as Saudi Arabia and other Gulf members ended their voluntary extra supply curbs on top of an OPEC-led deal.

Russia’s oil output in July was unchanged from June levels, the nation’s Energy Ministry said on Sunday.

OPEC+, a grouping of OPEC and allies including Russia, is set to step up output in August, adding about 1.5 million bpd to global supply.

U.S. energy firms kept the number of oil and natural gas rigs unchanged at a record low as the rig count fell for a fifth straight month, although July marked the smallest monthly decline.

Oil prices are set for a slow crawl upwards this year as the gradual easing of coronavirus-led restrictions buoys demand, although a second COVID-19 wave could slow the pace of recovery, a Reuters poll showed on Friday.

The Australian state of Victoria declared a state of disaster and authorities in the Philippines said they would impose fresh restrictions in Manila this week, reflecting worries around the world about getting the pandemic under control.

“Adding to matters is that the U.S. consumer market is entering the last few weeks of peak driving season and with mobility tracking data flatlining,” Stephen Innes, chief global market strategist at AxiCorp, said in a report.

“Unless there is a significant drop in the COVID-19 case count curve that is sufficient enough to reduce consumer fear of the virus and shift mobility data higher, demand might not get much better from here on in,” he said.

Oil prices bounce back from 3-week lows, but economic headwinds loom

CNBC

REUTERS
KEY POINTS
  • Brent crude was up by 40 cents, or 0.9%, at $43.34 a barrel by 0204 GMT. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10.
  • U.S. crude gained 35 cents, or 0.9%, to $40.27 after dropping 3.3% the previous session, again recovering from lows not seen since July 10.
An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia.
An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia.
Simon Dawson | Bloomberg | Getty Images

Oil prices rose on Friday, recovering further ground after touching three-week lows in the previous session, hit by a record decline in U.S. growth as the coronavirus ravaged the world’s biggest economy and oil consumer.

Brent crude was up by 40 cents, or 0.9%, at $43.34 a barrel by 0204 GMT. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10.

U.S. crude gained 35 cents, or 0.9%, to $40.27 after dropping 3.3% the previous session, again recovering from lows not seen since July 10.

That leaves Brent on track for a fourth month of gains, while U.S. crude is heading for a third consecutive month of increases, as the contracts have recovered from the depths reached in April when much of the world was in lockdown.

But as a second wave of infections rages around the world, the threat to oil demand is becoming apparent.

“Despite the resilient and range-bound nature of oil pricing over recent weeks, plateauing global demand and increasing OPEC+ output raises the question of whether the market can absorb additional barrels,” RBC Capital Markets said in a note.

OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively plan to increase production from Saturday, adding about 1.5 million barrels per day to global supply.

Globally, the economic outlook has dimmed again, with increasing coronavirus infections raising the risk of renewed lockdowns and threatening any rebound, according to Reuters polls of over 500 economists globally.

That was underlined by Thursday’s news that U.S. gross domestic product collapsed at a 32.9% annualised rate, the deepest decline in output since records began in 1947.

Oil prices head for weekly decline as coronavirus cases surge in U.S. and elsewhere

CNBC

Reuters
KEY POINTS
  • Oil prices fell on Friday, adding to steep losses from the previous session, and were headed for weekly declines on worries that renewed lockdowns would suppress demand.
  • Brent crude was down by 25 cents, or 0.6%, at $42.10 a barrel by 0341 GMT after falling more than 2% on Thursday.
  • U.S. oil fell 33 cents, or 0.8%, at $39.29 a barrel after a drop of 3% in the previous session.
The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019.
The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019.
Angus Mordant | Reuters

Oil prices fell on Friday, adding to steep losses from the previous session, and were headed for weekly declines on worries that renewed lockdowns following a surge in coronavirus cases in the United States and elsewhere would suppress fuel demand.

Brent crude was down by 25 cents, or 0.6%, at $42.10 a barrel by 0341 GMT after falling more than 2% on Thursday.

U.S. oil fell 33 cents, or 0.8%, at $39.29 a barrel after a drop of 3% in the previous session.

Brent looks set for a weekly decline of nearly 2% and U.S. crude for a fall of more than 3%. Trading was quiet with Singapore on holiday for an election.

While many analysts are expecting economies and fuel demand to bounce back from the pandemic, record daily increases in coronavirus infections in the United States, the world’s biggest oil consumer, raised concerns about the pace of any recovery.

“I do not suspect many oil traders will be looking to place significant bids in the market today, suggesting prices may continue to wallow into the weekend,” said Stephen Innes, chief global markets strategist at AxiCorp.

More than 60,500 new Covid-19 cases were reported in the United States on Thursday, setting a daily record, with Americans being told to take new precautions. The tally was also the highest daily count yet for any country since the pathogen emerged in China late last year.

In Australia, the government on Friday will consider reducing the number of citizens allowed to return to the country from overseas, after authorities ordered a new lockdown of the country’s second-most populous city, Melbourne.

Oil inventories also remain bloated due to the evaporation of demand for gasoline, diesel and other fuels during the initial outbreak.

U.S. crude oil inventories rose by nearly 6 million barrels last week after analysts had forecast a decline of just over half that figure.

Oil prices slip on demand fears as U.S. virus cases surge

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures fell 10 cents, or 0.3%, to $39.72 a barrel at 0148 GMT, trimming a 1.4% rise from Wednesday.
  • Brent crude futures eased 6 cents, or 0.1%, to $41.97 a barrel, after rising 1.8% in the previous session.
An aerial view shows a cruise ship (L) and tanker vessel anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view shows a cruise ship (L) and tanker vessel anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices dipped on Thursday after the United States recorded its biggest one-day spike in coronavirus cases and California reimposed some lockdown measures, stoking worries a resurgence in COVID-19 cases will stall a recovery in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures fell 10 cents, or 0.3%, to $39.72 a barrel at 0148 GMT, trimming a 1.4% rise from Wednesday.

Brent crude futures eased 6 cents, or 0.1%, to $41.97 a barrel, after rising 1.8% in the previous session.

California sharply rolled back efforts to reopen its economy on Wednesday, banning indoor restaurant dining in much of the state, closing bars and beefing up enforcement of social distancing and other measures as COVID-19 infections surged.

Analysts highlighted worries about the spike in cases in heavily populated U.S. sun belt states, which are among the country’s biggest consumers of gasoline.

New U.S. COVID-19 cases rose by nearly 50,000 on Wednesday, according to a Reuters tally, in the biggest one-day spike since the start of the pandemic. More than half the new cases each day are in Arizona, California, Florida and Texas.

Oil prices rose in the previous session after U.S. Energy Information Administration data showed U.S. crude inventories fell 7.2 million barrels from a record high last week, far more than analysts had expected, as refiners ramped up production and imports eased.

However, analysts noted the data also showed gasoline stockpiles rose due to a sharp increase in imports, against expectations for inventories to fall.

“Counter-seasonal builds in gasoline inventories as stockpiles unexpectedly rose are not precisely a bullish delight,” AxiCorp strategist Stephen Innes said in a note.

“The EIA data showed that gasoline imports hit the highest level since last August and peaked the most on a seasonal basis in nine years.”

All eyes will be on driving activity in the United States over the upcoming July 4th holiday weekend and how quickly U.S. producers revive shut-in production, analysts said.

Oil prices drop for second straight session as coronavirus spike cools demand hopes

CNBC

Reuters
KEY POINTS
  • Brent crude dropped 72 cents, or 1.8%, to $40.30 a barrel by 0231 GMT, while U.S. crude was at $37.82, down 67 cents, or 1.7%.
  • Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil prices slid for a second straight session on Monday as coronavirus cases rose in the United States and other places, leading countries to resume partial lockdowns that could hurt fuel demand.

Brent crude dropped 72 cents, or 1.8%, to $40.30 a barrel by 0231 GMT, while U.S. crude was at $37.82, down 67 cents, or 1.7%.

Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.

However, global coronavirus cases exceeded 10 million on Sunday as India and Brazil battled outbreaks of over 10,000 cases daily. New outbreaks are reported in countries including China, New Zealand and Australia, prompting governments to impose restrictions again.

“The second wave contagion is alive and well,” Howie Lee, economist at Singapore’s OCBC bank said. “That is capping the bullish sentiment that we’ve seen in the last six to eight weeks.”

Other factors restricting oil prices’ advance at this stage include poor refining margins, high oil inventories and the resumption of U.S. production, Lee said.

Despite efforts by OPEC+ – the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – to reduce supplies, crude inventories in the United States, the world’s largest oil producer and consumer, have hit all-time highs.

“There is also a risk that gains in prices recently could see some U.S. shale producers restart wells,” ANZ analysts said.

Even as the number of operating oil and natural gas rigs dropped to a record low last week, higher oil prices are prompting some producers to resume drilling.

“In the next one-two weeks, we should see an uptick in rig count commensurate with the pick-up in oil production,” OCBC’s Lee said.

Elsewhere, U.S. shale oil pioneer Chesapeake Energy Corp filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of coronavirus outbreak on energy markets.