Oil prices inch higher on output cut support, but U.S. coronavirus spike caps gains

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures climbed 13 cents, or 0.3%, to $40.76 a barrel.
  • Brent crude futures rose 7 cents, or 0.2%, to $43.17, adding to a 0.7% gain on Monday.
A woman wearing face mask walks on the ocean front while Oil tankers are seen anchored off the coast of Long Beach, California, after sunset on April 25, 2020.
A woman wearing face mask walks on the ocean front while Oil tankers are seen anchored off the coast of Long Beach, California, after sunset on April 25, 2020.
Apu Gomes | AFP | Getty Images

Oil prices cautiously rose in early trade on Tuesday with major producers sticking to supply cuts, but gains were capped as U.S. coronavirus cases surged, potentially hampering a recovery in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures climbed 13 cents, or 0.3%, to $40.76 a barrel at 0103 GMT, recouping a 2 cent loss from Monday.

Brent crude futures rose 7 cents, or 0.2%, to $43.17, adding to a 0.7% gain on Monday.

The market is still being supported by a bigger-than-expected drawdown in U.S. crude stockpiles reported last week and by record supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, AxiCorp strategist Stephen Innes said.

However, traders are also closely watching prospects for U.S. fuel demand, with 16 states reporting record increases in new cases of COVID-19 in the first five days of July, according to a Reuters tally. Florida confirmed a record 11,000 cases in a single day, more than any European country reported in one day at the height of the crisis.

“Summer driving demand in the U.S. is low, keeping gasoline demand subdued, and a reintroduction of lockdowns is a major headwind,” ANZ said in a note.

Data from the American Petroleum Institute industry group later on Tuesday and the U.S. Energy Information Administration on Wednesday are expected to show a 100,000 barrel rise in gasoline stockpiles, six analysts polled by Reuters estimated.

Meanwhile a U.S. court on Monday ordered the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to Midwest and Gulf Coast regions, over environmental concerns.

Market sources in the Bakken said the closure of the 570,000 barrels per day (bpd) pipeline while a thorough environmental impact statement is completed will likely divert some oil flows to transportation by rail.

Oil prices fall further on virus fears, U.S. crude stock build

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.7%, to $37.75 per barrel at 0245 GMT on Thursday, after dropping $2.36 on Wednesday.
  • Brent crude futures fell 30 cents, or 0.7%, to $40.01 per barrel after falling $2.32 on Wednesday.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices slipped on Thursday, extending losses of more than 5% in the previous session, weighed down by record high U.S. crude inventories and worries that a rapid resurgence in Covid-19 cases could choke a revival in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.7%, to $37.75 per barrel at 0245 GMT on Thursday, after dropping $2.36 on Wednesday.

Brent crude futures fell 30 cents, or 0.7%, to $40.01 per barrel after falling $2.32 on Wednesday. A day earlier, the benchmark contract hit its highest price since early March, just before pandemic lockdowns and a Saudi-Russian price war slammed markets.

Wednesday’s selloff came after U.S. government data showed crude stockpiles rose by 1.4 million barrels, driving inventories to a record high for a third straight week last week.

Analysts, however, said that was mostly due to a flotilla of Saudi cargoes booked by U.S. refiners when prices slumped in March. Those shipments are due to ease soon.

Worries about a second wave of Covid-19 cases in several U.S. states, where lockdowns had eased, and a rapid spread of infections in South America and South

Asia are expected to keep a lid on fuel demand, market watchers said.

“The latest trends there are not encouraging,” said National Australia Bank’s head of commodity research, Lachlan Shaw.

The fear is that even if lockdowns are eased, people will stay home because of the perceived health risks.

Stephen Innes, market strategist at AxiCorp, said mobility data from Google showed driving in Texas, Florida and to a certain extent California was flatlining.

In another reminder of fuel demand woes, Australia’s flagship airline, Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.

“It highlights the reality that we’re talking years before international aviation recovers — probably three to four years,” Shaw said.

Oil prices fall on demand concerns as coronavirus cases rise

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures dropped 2.1%, or 80 cents, to $37.16 a barrel at 0138 GMT, adding to a loss of 42 cents on Wednesday.
  • Brent crude futures fell 1.5%, or 61 cents, to $40.10 a barrel. The benchmark contract declined 25 cents on Wednesday.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices fell around 2% on Thursday as a spike in new coronavirus cases in China and the United States renewed fears that people would stay home, stalling a recovery in fuel demand even as lockdowns ease.

U.S. West Texas Intermediate (WTI) crude futures dropped 2.1%, or 80 cents, to $37.16 a barrel at 0138 GMT, adding to a loss of 42 cents on Wednesday.

Brent crude futures fell 1.5%, or 61 cents, to $40.10 a barrel. The benchmark contract declined 25 cents on Wednesday.

Worries about fuel demand rose after a surge in coronavirus cases led Beijing to cancel flights and shut schools and several U.S. states, including Texas, Florida and California, reported sharp increases in new cases.

A rise in U.S. crude stockpiles to a record high for a second week in a row also weighed on sentiment, even though U.S. government data showed inventories of gasoline and distillate, which include diesel and heating oil, fell.

“People are concerned about the coronavirus resurging in China and crude stockpiles rising,” said Lachlan Shaw, head of commodity research at National Australia Bank.

While prices dipped, they are likely to remain in the $35 to $40 band they have been trading in so far in June, with the Organization of the Petroleum Exporting Countries and its allies, a grouping called OPEC+, mostly sticking to promised supply cuts, U.S. shale producers holding back output, and fuel demand gradually improving, analysts said.

OPEC+ compliance with crude production cut commitments in May was 87%, two OPEC+ sources said on Wednesday.

However OPEC warned in a monthly report the market would remain in surplus in the second half of 2020 even as demand improves, as it now expects supply from outside the group to be about 300,000 barrels per day higher than earlier thought.

“OPEC’s dour assessment” added to negative sentiment, ANZ said in a note.

Oil prices drop on concerns about patchy demand recovery, record U.S. stocks

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures erased gains from Wednesday, falling as low as $38.42 a barrel. The benchmark contract was down 2.5%, or 99 cents, at $38.61 at 0211 GMT.
  • Brent crude futures fell 2.2%, or 92 cents, to $40.81 a barrel, also giving up gains from Wednesday.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Michael Heiman | Getty Images

Oil prices fell more than 2% on Thursday on worries about slow demand growth with coronavirus cases rising, U.S. crude stockpiles hitting an all-time high and the U.S. Federal Reserve projecting recovery from the pandemic would take years.

U.S. West Texas Intermediate (WTI) crude futures erased gains from Wednesday, falling as low as $38.42 a barrel. The benchmark contract was down 2.5%, or 99 cents, at $38.61 at 0211 GMT.

Brent crude futures fell 2.2%, or 92 cents, to $40.81 a barrel, also giving up gains from Wednesday.

U.S. crude inventories rose unexpectedly by 5.7 million barrels in the week to June 5 to 538.1 million barrels — a record — as imports were boosted by the arrival of supplies bought by refiners when Saudi Arabia flooded the market in March and April, data from the Energy Information Administration showed.

At the same time, gasoline stockpiles grew more than expected to 258.7 million barrels. Distillate stockpiles, which include diesel and heating oil, rose by 1.6 million barrels, but the increase was smaller than in previous weeks.

The market took a negative view on the stock build, even though there were signs of improving gasoline demand in the data, too, said Commonwealth Bank commodities analyst Vivek Dhar.

“Most of the (price) gains have come from when strict lockdowns were lifted. Coming back to where it was pre-COVID – that will take some time,” Dhar said.

“The key for markets to feel like the worst is over is: when will stockpiles peak globally. That’s what the market is paying attention to.”

Adding to the negative sentiment, the U.S. Federal Reserve said the world’s largest economy would shrink 6.5% this year and the unemployment rate would be at 9.3% at the end of 2020 in its first projections of the pandemic era.

“Short-term and fast money traders are very much inclined to sell outright or to take profits on any hint of bearish data,” said Stephen Innes, chief global market strategist at Axicorp.

In a further sign that recovery will continued to be overshadowed by the coronavirus, total U.S. cases topped 2 million on Wednesday, with new infections rising slightly after five weeks of declines, according to a Reuters analysis.

Oil prices rise as easing of lockdowns spurs fuel demand hopes

CNBC

Reuters
KEY POINTS
  • Brent crude futures rose 0.3%, or 14 cents, by 0435 GMT to $40.94 a barrel. The benchmark contract had fallen $1.50 on Monday, snapping a seven-day streak of gains.
  • U.S. West Texas Intermediate (WTI) crude futures rose 0.7%, or 26 cents, to $38.45 a barrel, after dropping by $1.36 on Monday.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices climbed on Tuesday as the easing of coronavirus lockdown measures across the globe lifted trader hopes for a swift recovery in demand, though gains were capped by the specter of persistent oversupply in the market.

Brent crude futures rose 0.3%, or 14 cents, by 0435 GMT to $40.94 a barrel. The benchmark contract had fallen $1.50 on Monday, snapping a seven-day streak of gains.

U.S. West Texas Intermediate (WTI) crude futures rose 0.7%, or 26 cents, to $38.45 a barrel, after dropping by $1.36 on Monday.

“With Brent holding very nicely above $40, there’s talk among traders that WTI will test that level soon,” said Michael McCarthy, chief market strategist at CMC Markets.

Goldman Sachs has also raised its 2020 oil price forecasts, with Brent now seen at $40.40 a barrel and WTI at $36 a barrel.

Tuesday’s gains came as New York, the U.S. city hardest hit by the novel coronavirus outbreak, began reopening on Monday after about three months, potentially spurring fuel demand.

U.S. crude and gasoline inventories are estimated to have fallen by 1.5 million barrels and about 100,000 barrels respectively in the week to June 5, a preliminary Reuters poll showed ahead of a report from the American Petroleum Institute industry group later on Tuesday.

However distillate inventories, which include diesel and heating oil, were seen rising by 2.9 million barrels.

“You’ve got demand recovering gradually but steadily,” said Lachlan Shaw, head of commodity research at National Australia Bank. “However there’s still massive excess supply, so OPEC and friends need to control barrels coming into the market.”

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, a grouping known as OPEC+, on Saturday agreed a one-month extension through July of a record 9.7 million barrels per day output cut.

However, Saudi Arabia said on Monday the kingdom and its allies Kuwait and the United Arab Emirates would not extend an additional 1.18 million bpd in cuts on top of the OPEC+ cuts in July.

Meanwhile Libya’s National Oil Corporation (NOC) told employees to shut its Sharara oil field just hours after maintenance operations started as an “armed force” had entered the site.

“It seems pricing in consistent Libya production might be premature,” said Edward Moya of OANDA. “The oil market … could easily go back into deeply oversupplied territory, so any threats to production should help stabilise prices.”