Oil prices rise amid risk of supply disruptions

CNBC

  • Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply.
  • Traders said those risks included potentially spreading conflict in the Middle East and renewed U.S. sanctions against Iran.

Oil fracking California

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Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply, especially in the Middle East.

Brent crude oil futures were at $71.69 per barrel at 0326 GMT, up 27 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $66.54 a barrel.

Traders said oil markets were receiving general support due to a sense that there were high risks of supply disruptions, including a potentially spreading conflict in the Middle East, renewed U.S. sanctions against Iran and falling output as a result of political and economic crisis in Venezuela.

“With so many potential supply disruptors in play and few signs that the current market upheaval will end any time soon, traders continue to pay the geopolitical risk premium,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

“Oil prices should remain bid … at least through the Iran nuclear deal deadline (May 12) if not for the remainder of 2018,” he added.

Oil markets have generally been well supported this year, with Brent up by around 16 percent from its 2018-low in February, due to healthy demand which comes as the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) leads supply cuts aimed at tightening the market and propping up prices.

US output soars

Beyond OPEC’s production restraint and concerns about supply disruptions, the main market driver in oil has been the United States, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day (bpd), largely thanks to a booming shale industry.

Only Russia pumps out more oil currently at almost 11 million bpd.

“U.S. shale producers have been quietly capitalizing on higher oil prices with increasing rig counts seen. A staggering amount of 73 rotary rigs have been placed since January 2018,” said Benjamin Lu of Phillip Futures in a note on Tuesday.

“As such, we expect a softening in crude oil prices as markets adjust from a bullish streak,” he added.

The American Petroleum Institute (API) is due to publish weekly U.S. fuel inventory data later on Tuesday while official government data, including on production, is due from the U.S. Energy Information Administration (EIA) on Wednesday.

Oil prices could rally to $100 a barrel if Middle East tensions ‘really kick off,’ analyst says

CNBC

  • “I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.
  • Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday.
  • World leaders continued to mull over military action on Friday, in response to a suspected chemical attack in Syria over the weekend.

What you see is a shift in the oil market, says energy expert

What you see is a shift in the oil market, says energy expert  

Oil prices could soon skyrocket to more than $100 a barrel amid escalating tensions in the Middle East, one oil analyst told CNBC Friday.

Crude futures surged to highs not seen since December 2014 earlier in the week, underpinned by greater geopolitical uncertainty in Syria and elevated concerns over the prospect of imminent military action by Western powers.

“I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.

A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

Brittany Sowacke | Bloomberg | Getty Images
A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

He added market participants had been “laughed out the room” when they projected crude futures to reach either $60 or $70 a barrel six months ago. But heightened tensions in the Middle East had since brought about the prospect of oil prices soaring to more than $100 a barrel later this year, he added.

Geopolitical premium ‘alive and well’

Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday, shortly after President Donald Trump‘s comments about potential missile strikes and reports of dwindling global oil stocks.

Brent crude was trading at $72.26 during lunchtime deals on Friday, up around 0.3 percent, while WTI traded at $67.35, approximately 0.4 percent higher. Both benchmarks have gained about $5 since the start of the week.

An uptick in oil prices followed incendiary comments from Trump on Wednesday. The U.S. president tweeted missiles “will be coming,” in response to a suspected chemical attack in Syria over the weekend. He has since sought to dial back such explosive rhetoric, raising the prospect that an attack on Syria may not be as imminent as it first appeared.

Nonetheless, world leaders continued to mull over military action in the war-torn country on Friday.

President Donald Trump

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President Donald Trump

“Trump’s will-he-or-won’t-he antics are here to stay and will, therefore, ensure that the geopolitical risk premium remains alive and well,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note Friday.

He added oil prices were likely to continue to extend their recent gains in the near term.

However, the International Energy Agency (IEA) said Friday it “remained to be seen” whether recently elevated oil prices could be sustained.

In the Paris-based organization’s latest monthly report, the group left its forecast for oil demand unchanged at 99.3 million barrels per day (bpd) in 2018. The IEA’s outlook for supply also remained the same, as it projected non-OPEC growth to reach 1.8 million bpd this year.

Oil prices rise on Middle East tensions, healthy demand

CNBC

  • Oil prices rose on Wednesday, supported by tensions in the Middle East and healthy global demand.
  • Rising U.S. output from the United States continued to weigh on markets.
  • Saudi Arabia’s Crown Prince Mohammed bin Salman arrived in to Washington for a state visit.

Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.

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Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.

Oil prices rose on Wednesday, supported by tensions in the Middle East and healthy global demand , although rising U.S. output from the United States continued to weigh on markets.

U.S. West Texas Intermediate (WTI) crude futures were at $63.82 a barrel at 0027 GMT, up 28 cents, or 0.4 percent, from their previous close.

Brent crude futures were at $67.66 per barrel, up 24 cents, or 0.4 percent.

Saudi Arabia’s Crown Prince Mohammed bin Salman arrived in to Washington for a state visit, raising market speculation the United States could reimpose sanctions on Iran, following rewnewed criticism of the 2015 nuclear deal.
“The presence of the Saudi Crown Prince MBS in Washington and his clear agenda to ramp up pressure on Iran, has for me, been the key driver… of oil, which rose strongly,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Energy consultancy FGE said it was likely that the United States would reimpose sanctions on Iran soon, resulting in a 250,000 to 500,000 barrels per day (bpd) drop in its exports by year-end.

Trump meets with Saudi crown prince

Trump meets with Saudi crown prince  

Analysts also pointed to healthy economic growth and a weak dollar as oil price drivers.

In a sign of healthy demand, U.S. crude stocks fell by 2.7 million barrels in the week ended March 16 to 425.3 million, as refineries boosted output, the American Petroleum Institute said on Tuesday.

“The global economy is humming, and robust demand solidly underpins commodity prices. The soft dollar and a bullish market mood have been equally supportive elements,” said Norbert Ruecker, head of macro and commodity Research at Swiss bank Julius Baer.

A weaker greenback makes imports of dollar-denominated crude cheaper for countries using other currencies at home, potentially spurring demand.

Despite this, he said seasonally low demand at the end of the northern hemisphere winter season meant he had “a rather cautious near-term outlook on commodities.”

Looming over oil markets has been surging U.S. crude oil production, which has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia and within reach of Russia’s 11 million bpd.

Analysts say U.S. producers are not yet at their limits.

Some say U.S. producers are holding back expansion in order to prevent another price crash, as seen between 2014 and 2016.

“The larger players are holding back capital expenditures in an attempt to avoid past mistakes… Despite a substantial growth in the U.S. production, there is no effort to produce to the max with no regard to the market,” said energy consultancy FGE in a note.

Oil prices rise on Middle East tension, but soaring US output caps gains

CNBC

  • Oil prices edged up on Tuesday, lifted by tensions in the Middle East.
  • Rising output in the United States and shaky stock markets put a lid on further gains.

An oil pump jack in Gonzales, Texas.

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An oil pump jack in Gonzales, Texas.

Oil prices edged up on Tuesday, lifted by tensions in the Middle East, although rising output in the United States and shaky stock markets put a lid on further gains.

U.S. West Texas Intermediate (WTI) crude futures were at $62.31 a barrel at 0128 GMT, up 25 cents, or 0.4 percent, from their previous close.

Brent crude futures were at $66.26 per barrel, up 21 cents, or 0.3 percent.

Traders pointed to concerns in the Middle East, where the United States may reimpose sanctions on Iran, as well as tensions between Saudi Arabia and Iran.

Worries about Venezuela’s tumbling crude production also supported oil markets.

The International Energy Agency said last week that Venezuela, where an economic crisis has cut oil production by almost half since early 2005 to well below 2 million bpd, was “clearly vulnerable to an accelerated decline”, and that such a disruption could tip global markets into deficit.

Falls on global share markets helped cap gains. Markets are under pressure from concerns over a possible trade war between the United States and other major economies, as well as from fears of stiffer regulation as Facebook came under fire following reports it allowed improper access to user data.

Also looming over oil markets has been surging U.S. crude oil production, which has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia.

Only Russia produces more, at around 11 million bpd, although U.S. output is expected to overtake Russia’s later this year as well.

Soaring U.S. output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) to curb supplies and bolster prices.

Many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.

Oil steadies as Middle East tensions offset concern over China demand

CNBC

  • China’s October crude imports fall to 1-year low
  • But ongoing OPEC-led supply cuts support crude prices
  • Traders concerned about rising Middle East tension

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil steadied on Wednesday as Chinese crude imports fell to a one-year low, but losses were offset by investor caution over rising political tensions in the Middle East.

Traders said they were closely watching escalating tensions in the Middle East, especially between regional rivals Saudi Arabia and Iran.

Brent futures were at $63.80 a barrel at 1005 GMT, up 11 cents, while U.S. West Texas Intermediate (WTI) futureswere down 8 cents at $57.12 a barrel.

Brent crude hit $64.65 earlier this week, its highest since mid-2015, as political tensions in the Middle East escalated after a sweeping anti-corruption purge in top crude exporter Saudi Arabia, which in turn has confronted Iran over the conflict in Yemen.

China’s October oil imports fell to just 7.3 million barrels per day from a near record-high of about 9 million bpd in September, according to data from the General Administration of Customs on Wednesday. That is the lowest level since October 2016, though imports were up 7.8 percent from a year ago.

Li Yan, oil analyst with Zibo Longzhong Information Group, said the lower imports reflected fewer purchases from independent refineries, “as many of them are running out of crude quotas for this year.”

Here's what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup

Here’s what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup  

For next year, however, independent refiners are likely to boost their imports again as authorities on Wednesday raised the 2018 crude oil import quota by 55 percent over 2017 to 2.85 million bpd.

The oil price has gained around 14 percent in the last month alone, propelled largely by evidence that OPEC’s efforts, together with those of its partners to curtail output, is helping erode a global overhang of unused crude.

“Stronger oil fundamentals and investor inflows have been the catalyst for higher oil prices, but adding further support now is a focus on several geopolitical risks that have been looming over oil markets for a while,” said analysts at Citi.

The Organization of the Petroleum Exporting Countries‘ 2017 World Oil Outlook showed the group predicts demand for its crude will rise more slowly than previously expected in the next two years, as higher prices from its supply policy stimulate output growth from rival producers.

“The call on OPEC in 2019 envisaged by OPEC was reduced by 600,000 to a good 33 million bpd, and is expected to remain at roughly this level until 2025,” Commerzbank said in a note.

“Currently, OPEC is only producing somewhat less than this amount. This leaves OPEC virtually no scope to expand production in the next eight years.”