OPEC, Russia approve biggest-ever oil cut to support prices amid coronavirus pandemic

REUTERS

BAKU/DUBAI/LONDON (Reuters) – OPEC and allies led by Russia agreed on Sunday to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by 20%.

Measures to slow the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.

The group, known as OPEC+, said it had agreed to reduce output by 9.7 million barrels per day (bpd) for May and June, after four days of talks and following pressure from U.S. President Donald Trump to arrest the price decline.

OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1. OPEC had the same figure in its draft statement but removed it from the final version.

The biggest oil cut ever is more than four times deeper than the previous record cut in 2008. Producers will slowly relax curbs after June, although reductions in production will stay in place until April 2022.

In a statement from the White House, Trump welcomed the commitment by Saudi Arabia and Russia “to return oil production to levels consistent with global energy and financial market stability.”

Earlier on Twitter, Trump wrote: “The big Oil Deal with OPEC+ is done. This will save hundreds of thousands of energy jobs in the United States.”

Thanking Russian President Vladimir Putin and Saudi King Salman for pushing the deal through, Trump added: “I just spoke to them… Great deal for all,”

Oil demand has dropped by around a third because of the coronavirus pandemic. Oil prices jumped more than $1 a barrel in Monday trading after the agreement, but gains were capped amid concern that it would not be enough to head off oversupply with the coronavirus pandemic hammering demand.

Total global cuts will include contributions from non-members, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases by the world’s largest consumers.

Saudi Energy Minister Prince Abdulaziz bin Salman told Reuters that real effective cuts by OPEC+ would total 12.5 million bpd because Saudi Arabia, the United Arab Emirates and Kuwait would cut supplies steeper given higher output in April.

Three OPEC+ sources said non-members Brazil, Canada, Indonesia, Norway and the United States would contribute 4 million to 5 million bpd.

Three OPEC+ sources said the International Energy Agency (IEA), the energy watchdog for the world’s most industrialised nations, would announce purchases into stocks by its members to the tune of 3 million bpd in the next couple of months.

The IEA said it would provide an update on Wednesday when it releases its monthly report. The United States, India, Japan and South Korea have said they could buy oil to replenish reserves.

SEVERE DISTRESS

Trump had threatened OPEC leader Saudi Arabia with oil tariffs and other measures if it did not fix the market’s oversupply problem as low prices have put the U.S. oil industry, the world’s largest, in severe distress.

Canada and Norway had signalled a willingness to cut and the United States, where legislation makes it hard to act in tandem with cartels such as OPEC, said its output would fall steeply by itself this year because of low prices.

The Canadian government said in a statement it welcomed the OPEC+ deal, saying it was committed to achieving price certainty and economic stability.

The deal had been delayed since Thursday, however, after Mexico, worried about derailing its plans to revive heavily indebted state oil company Pemex, balked at the production cuts it was asked to make.

Mexican President Andres Manuel Lopez Obrador said on Friday that Trump had offered to make extra U.S. cuts on his behalf, an unusual offer by the U.S. leader, who has long railed against OPEC.

Trump said Washington would help Mexico by picking up “some of the slack” and being reimbursed later. He did not say how that would work.

A previous agreement by OPEC+ to cut production this year fell apart because of a dispute between Russia and Saudi Arabia, triggering a price war that brought a flood of supply just as demand for fuel was crushed by the coronavirus pandemic.

Global oil demand is estimated to have fallen by around 30 million bpd as more than 3 billion people are locked down in their homes due to the outbreak.

Banks Goldman Sachs and UBS predicted last week that Brent prices would fall back to $20 per barrel as cuts would not be enough to help offset severe demand destruction because of the restrictions to curb the coronavirus outbreak.

Reporting by Reuters OPEC Team, Alex Lawler in London, Lamine Chikhi in Algiers; Nailia Bagirova in Baku, Katya Golubkova in Moscow and Tamara Vaal in Nur-Sultan; Additional reporting by Stephanie Kelly in New York; Florence Tan in Singapore and David Ljunggren in Ottawa; Writing by Andrey Ostroukh and Dmitry Zhdannikov; Editing by Alex Richardson, Tom Brown and Peter Cooney

Oil prices gain, US crude little changed after inventory data

CNBC

Reuters
KEY POINTS
  • West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.
  • Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.
Reusable: Idled oil drilling rigs North Dakota
Stacked rigs are seen along with other idled oil drilling equipment in Dickinson, North Dakota, June 26, 2015.
Andrew Cullen | Reuters

Oil prices rose on Wednesday after steep falls in the previous session, although U.S. crude trailed gains for international benchmark Brent after U.S. crude inventories fell less than expected.

West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.

Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.

Crude inventories fell by 1.4 million barrels in the week to July 12 to 460 million, industry group the American Petroleum Institute (API) said on Tuesday. That compared with analysts’ expectations for a decrease of 2.7 million barrels.

Official data is due out later today from the U.S. government’s Energy Information Administration (EIA). If it confirms the fall it will be the fifth consecutive weekly decline, the longest stretch since the beginning of 2018.

“Market participants are looking ahead to the weekly IEA oil inventory data for the U.S., which is expected to show yet another draw down,” Abhishek Kumar, head of analytics at Interfax Energy in London.

“Nevertheless, oil production in the Gulf of Mexico returning to normal following Hurricane Barry will limit price gains, ” Kumar said.

More than half the daily crude production in the U.S. Gulf of Mexico remained offline on Tuesday in the wake of Hurricane Barry, the U.S. drilling regulator said, as most oil companies were re-staffing facilities to resume production.

The Bureau of Safety and Environmental Enforcement said 1.1 million barrels per day of oil, or 58% of the region’s total, and 1.4 billion cubic feet per day of natural gas output remained shut.

The smaller than expected decline in crude stocks suggested production shut-ins caused by Hurricane Barry late last week had little impact on inventories.

Gasoline stocks also fell, declining by 476,000 barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel decline.

Distillate fuels stockpiles, which include diesel and heating oil, rose by 6.2 million barrels, compared with expectations for a 613,000-barrel gain, the API data showed.

Oil prices fell on Tuesday after U.S. President Donald Trump said progress has been made with Iran, signaling tensions could ease in the Middle East.

However, Iran later denied it was willing to negotiate over its ballistic missile program, contradicting a claim by U.S. Secretary of State Mike Pompeo, and appearing to undercut Trump’s statement.

Tensions between the United States and Iran over Tehran’s nuclear program have lent support to oil futures, given the potential for a price spike should the situation deteriorate.

Oil prices edge lower as China’s GDP growth slows

CNBC

Reuters
KEY POINTS
  • Brent crude futures for September fell 21 cents to $66.51 a barrel by 0222 GMT.
  • U.S. crude for August was down 28 cents at $59.93 a barrel.
reusable oil china
Jerome Favre | Bloomberg | Getty Images

Oil prices slipped on Monday after China posted its slowest quarterly economic growth in at least 27 years, reinforcing concerns about demand in the world’s largest crude oil importer.

Brent crude futures for September fell 21 cents to $66.51 a barrel by 0222 GMT while U.S. crude for August was down 28 cents at $59.93 a barrel. Both contracts last week posted their biggest weekly gains in three weeks on cuts in U.S. oil production and diplomatic tensions in the Middle East.

Refineries in the path of Tropical Storm Barry continued to operate despite flood threats while the storm has slashed U.S. Gulf of Mexico crude output by 73%, or 1.38 million barrels per day.

An unwinding of the risk premium from tropical storm Barry, lower oil demand forecasts and a lack of news from the Middle East may have led to a muted oil price reaction, Stephen Innes, managing partner at Bangkok-based Vanguard Markets, said.

China’s economic growth slowed to 6.2% in the second quarter from a year earlier, in line with analysts’ expectations, with demand at home and abroad faltering as the Sino-U.S. trade war bites.

Still, China’s industrial output and retail sales beat forecasts, “suggesting that the economy in China is healthier than we previously been pricing,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

In the Middle East, Iranian President Hassan Rouhani said in a televised speech on Sunday that Iran is ready to hold talks with the United States if Washington lifts sanctions and returns to the 2015 nuclear deal it quit last year.

Meanwhile Britain has offered to facilitate the release of the detained Iranian oil tanker Grace 1 if Tehran gave guarantees that it would not go to Syria.

Oil prices extend gains, climb further from five-month lows

CNBC

Reuters

KEY POINTS
  • Brent crude futures were up 85 cents, or 1.4%, at $62.51 a barrel by 0356. They gained 1.7% on Thursday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 71 cents, or 1.4%, at $53.30 per barrel. They finished the previous session 1.8% higher.
RT: Offshore oil rig Norway 160211
An offshore oil rig off the coast of Norway.
Nerijus Adomaitis | Reuters

Oil prices rose more than 1% on Friday, climbing further away from five-month lows hit earlier in the week after a report that Washington could postpone trade tariffs on Mexico and amid signs that OPEC and other producers may extend their supply cuts.

Brent crude futures were up 85 cents, or 1.4%, at $62.51 a barrel by 0356. They gained 1.7% on Thursday.

U.S. West Texas Intermediate (WTI) crude futures were up 71 cents, or 1.4%, at $53.30 per barrel. They finished the previous session 1.8% higher.

Brent and WTI on Wednesday hit their lowest marks since mid-January at $59.45 and $50.60, respectively, after U.S. crude output reached a record high and stockpiles climbed to their highest since July 2017.

That put both contracts in bear territory, having lost more than 20% from peaks reached in late April.

But on Thursday oil prices followed U.S. equities higher after Bloomberg News reported that the United States may delay tariffs on goods from Mexico as talks continue.

“After prices hit the depth of the sewer this week, and (were) arguably in oversold territory, traders were always going to be predisposed to book profits ahead of the weekend,” Stephen Innes, managing partner at Vanguard Markets said in a note.

Despite the two-day bounce, Brent is heading for a third week of decline, down more than 3%. So too is WTI, which is on track for a decline of about 0.4%.

Sentiment for oil remains dim as fresh signs emerge of a stalling global economy, with the trade war between the U.S. and China intensifying.

Prices had been supported by supply curbs by the Organization of the Petroleum Exporting Countries (OPEC) and producing allies, including Russia.

Supply has also been limited by U.S. sanctions on oil exports from Iran and Venezuela.

President Vladimir Putin said on Thursday that Russia had differences with OPEC over what constituted a fair price for oil, but that Moscow would take a joint decision on output at a policy meeting in coming weeks.

Also potentially keeping a lid on prices is the unrelenting rise in U.S. crude production.

U.S. oil output rose to a record 12.4 million barrels per day (bpd) in the week to May 31, the Energy Information Administration said on Wednesday, an increase of 1.63 million bpd since May 2018.

U.S. crude oil inventories also surged by 6.8 million barrels over the same week, to 483.26 million barrels, their highest levels since July 2017.

Research firm Rystad Energy has raised its forecast for U.S. crude output by 200,000 barrels bpd, to 13.4 million bpd by the December 2019, it said in a statement on its website.

Oil set for biggest monthly fall since November as trade conflicts spread

CNBC

Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $66.28 at 0311 GMT, down by 59 cents, or 0.9%, from last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $56.08 per barrel, down 51 cents, or 0.9%, from their last settlement. WTI earlier marked its lowest since March 8 at $55.66 a barrel.
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A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices fell on Friday and were on track for their biggest monthly fall since November as trade conflicts spread and U.S. crude output returned to record levels.

Front-month Brent crude futures, the international benchmark for oil prices, were at $66.28 at 0311 GMT, down by 59 cents, or 0.9%, from last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $56.08 per barrel, down 51 cents, or 0.9%, from their last settlement. WTI earlier marked its lowest since March 8 at $55.66 a barrel.

The drops mean that crude oil futures are on track for their biggest monthly loss since last November.

U.S. President Donald Trump ramped up trade tensions globally by vowing to slap tariffs on all goods from Mexico, firing up fears over economic growth and appetite for oil.

The Mexico trade dispute adds to a trade war between the United States and China, which many analysts expect to trigger a recession.

“All is not well with the economic world, at least according to bond and commodity traders,” Michael McCarthy, chief market strategist at futures brokerage CMC Markets in Australia, wrote in a note published on Friday.

“These (price) moves signal deteriorating sentiment about the outlook for global growth,” he said.

US output back to record

Crude prices have also been under pressure from a much smaller-than expected decline in U.S. stockpiles and U.S. crude oil production’s return to its record 12.3 million barrels per day.

The U.S. Energy Information Administration (EIA) said U.S. crude stocks fell by around 300,000 barrels last week, to 476.49 million barrels.

That was much less than the 900,000-barrel decline analysts forecast in a Reuters poll and well below the 5.3 million-barrel drawdown the American Petroleum Institute (API) reported on Wednesday.

Meanwhile, top oil exporter Saudi Arabia has raised production in May, a Reuters survey found, but not by enough to compensate for lower Iranianexports which collapsed after the United States tightened the screws on Tehran.

Washington will sanction any country which buys oil from Iran after the expiration of waivers on May 2, U.S. Special Representative for Iran Brian Hook said on Thursday.