Oil markets firm as Brent edges ever closer to $80 per barrel on tight market

CNBC

  • Oil prices firmed on Thursday, with Brent crude creeping ever closer to $80 per barrel.
  • U.S. bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020.
  • Not all pointed to a tighter market, however.

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 prices firmed on Thursday, with Brent crude creeping ever closer to $80 per barrel, a level it has not seen since November 2014, as supplies tighten while demand remains strong.

Brent crude futures were at $79.32 per barrel at 0027 GMT, up 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $71.68 a barrel, up 19 cents, or 0.3 percent, from their last settlement.

ANZ bank said on Thursday that Brent was “now threatening to break through $80 per barrel … (as) geopolitical risks continue to support prices, (and) an unexpected fall in inventories in the U.S. got investors excited yesterday.”

U.S. crude inventories dropped by 1.4 million barrels in the week to May 11, to 432.34 million barrels.

ANZ said the falling U.S. inventories were “raising concerns of tight markets heading into the U.S. driving season,” during which demand typically rises.

Looking beyond seasonal changes, U.S. bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020, due to a steady increase in demand.

Everything bullish?

Not all pointed to a tighter market, however.

The International Energy Agency (IEA) said on Wednesday that it had lowered its global oil demand growth forecast for 2018 from 1.5 million barrels per day (bpd) to 1.4 million bpd.

The IEA said global oil demand would average 99.2 million bpd in 2018.

And although supplies currently only stand at 98 million bpd due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), the IEA said that “strong non-OPEC growth … will grow by 1.87 million bpd in 2018.”

Leading production increases is the United States, where crude output has soared by 27 percent in the last two years, to a record 10.72 million bpd.

That puts the United States within reach of top producer Russia, which pumpsaround 11 million bpd.

As a result of its surging production, U.S. crude is increasingly appearing on global markets as exports.

Commodity brokerage Marex Spectron said that the surge in U.S. supplies was a “strongly price-bearish development.”

It said the economic outlook was also “firmly bearish” as “short-term credit conditions have worsened which … hasn’t been priced correctly by the market”.

The brokerage also said that U.S. energy intensity “continues to decrease which is never good news for the future consumption of oil”.

Oil: OPEC meeting at month-end in focus

CNBC

  • Oil markets were tepid Monday ahead of an OPEC meeting at the end of the month to decide whether to continue output cuts
  • Brent crude futures were at $62.56 per barrel, down 0.3 percent from their last close
  • U.S. West Texas Intermediate crude futures were at $56.59 a barrel, up 0.1 percent from their last settlement

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil markets were tepid on Monday as traders were reluctant to take on big new positions ahead of an OPEC meeting at the end of the month, when the producer club is expected to decide whether to continue output cuts aimed at propping up prices.

Brent crude futures, the international benchmark for oil prices, were at $62.56 per barrel at 0439 GMT, down 16 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $56.59 a barrel, up 4 cents, or 0.1 percent, from their last settlement.

Traders said they were avoiding taking on large new positions due to uncertainty in markets.

The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and prop up prices.

The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.

OPEC is expected to agree an extension of the cut as storage levels remain high despite recent drawdowns, although there are doubts about the willingness of some participants to continue to restrain output.

“(The) OPEC meeting remains the key sector catalyst into year-end … The market expectation is for an extension through 2018, created by OPEC comments early this fall … (but) there is increased risk that OPEC delays the extension decision,” U.S. bank Morgan Stanley said on Monday in a note to clients.

Morgan Stanley said that the question over extended cuts “has shifted to non-OPEC participants’ willingness to extend, primarily Russia”.

Despite this, Greg McKenna of futures brokerage AxiTrader said it was “worth noting data showed more longs added by the speculative community”, indicating expectations of rising prices.

In the United States, the number of rigs drilling for new oil production remained unchanged in the week to Nov. 17, at 738, data from oil services firm Baker Hughes showed on Friday.