Oil dips away from 2015 highs as rising US output weighs on outlook

CNBC

  • Oil prices dipped away from 2015 highs reached the last session
  • Dealt volumes of crude futures were declining fast as traders closed positions ahead of upcoming Christmas and New Year breaks

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices on Friday dipped away from 2015 highs reached the previous session, weighed down by rising U.S. output and the expected January re-opening of the Forties pipeline in the North Sea.

Dealt volumes of crude futures were declining fast as traders closed positions ahead of upcoming Christmas and New Year breaks.

U.S. West Texas Intermediate (WTI) crude futures were at $58.15 a barrel at 0130 GMT, down 21 cents, or 0.4 percent, from their last settlement.

Brent crude futures, the international benchmark for oil prices, were at $64.64 a barrel, down 26 cents, or 0.3 percent.

Brent on Thursday closed at $64.90 a barrel, its highest since June, 2015.

The dip on Friday was largely due to an outlook for rising supplies which triggered traders to sell out of long positions ahead of year-end.

Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore said there was “a lack of momentum as the holiday season subdues trading volumes”.

Saudi Arabia has to be ‘absolutely delighted’ with the oil market  

Weighing on the oil price outlook more fundamentally is the expected return of the 450,000 barrels per day (bpd) Forties pipeline system in the North Sea in January.

The pipeline, which delivers crude underpinning Brent futures contracts, shut down earlier this month due to a crack. Operator Ineos said on Thursday it expected to complete repairs around Christmas and would gradually restart the system in early January.

Longer term, analysts said rising crude production in the United States, which is fast approaching 10 million bpd, would also weigh on oil prices, undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, including Russia, to tighten the market.

“Supply is expected to grow further, paving the way to an oversupplied market, which can again exercise downward pressure on oil prices,” consultancy Rystad Energy said in a note.

“In 2018 Rystad Energy estimates the (oil) liquids supply to grow around 1.9 million bpd … The return of OPEC volumes after the current cut agreement has expired, coupled with continued strong output growth from North American shale, could result in an oversupplied market in 2019, again putting downward pressure on oil prices,” Rystad said.

The pact to withhold supplies started in January this year and is set to expire at the end of 2018.

Oil dips on rising US fuel stocks, but OPEC’s supply cuts offer support

CNBC

  • Oil prices dipped Wednesday as refined product inventories in the U.S., in what the market interpreted as a sign of lacklustre demand
  • Brent crude futures were down 24 cents, or 0.4 percent, at $62.62 a barrel
  • U.S. WTI crude futures were at $57.38 a barrel, down 24 cents, or 0.4 percent, from their last settlement

A combine harvester drives past a pumpjack in the Bemis-Shutts oil field in Kansas, U.S., on June 28, 2017.

Daniel Acker | Bloomberg | Getty Images

Oil prices dipped on Wednesday, as refined product inventories in the United States rose in what the market interpreted as a sign of lacklustre demand.

Brent crude futures, the international benchmark for oil prices, were down 24 cents, or 0.4 percent, at $62.62 a barrel as of 0456 GMT.

U.S. West Texas Intermediate (WTI) crude futures were at $57.38 a barrel, down 24 cents, or 0.4 percent, from their last settlement.

Traders said prices fell after an American Petroleum Institute (API) report late on Tuesday that showed a 9.2 million barrel rise in gasoline stocks in the week ended Dec. 1, and an increase of 4.3 million barrels in distillate inventories, which include motor diesel and heating oil.

The perception that the higher fuel stocks pointed to weak demand outweighed a drop in crude inventories by 5.5 million barrels, to 451.8 million, traders said.

Outside the United States, analysts said supply cuts by the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers — which last week were extended to all of next year — have helped lift Brent prices by more than 40 percent since June, and more than 130 percent since early 2016, when they hit their lowest level since 2003.

With the supply cuts likely in place throughout 2018, analysts said crude prices were well supported.

“Robust global demand and tight supplies should see Brent crude oil rise to $70 per barrel by mid-year (2018),” said Bank of America Merrill Lynch in its 2018 outlook.

One factor that could undermine OPEC’s and Russia’s effort to cut supplies and prop up prices is U.S. oil production, which has risen by 15 percent since mid-2016 to 9.68 million barrels per day, close to levels of top producers Russia and Saudi Arabia.

“U.S. shale producers continue to win market share,” said Fawad Razaqzada, analyst at futures brokerage Forex.com.

But weaker economic performance and a decline in refinery capacity utilisation in the first quarter could be a drag on oil demand and dampen prices, said Georgi Slavov, head of research at commodity broker Marex Spectron.

“Demand remains firm, which is the main reason for us to still see oil at/above $60 per barrel. This is likely to change as we approach 2018,” Slavov said in a note.

“We are starting to pick up weakness in the macro performance of key oil consuming regions. We are also starting to take note of the forthcoming January-February decline in refinery capacity utilisation,” he said.