Oil rises, extending gains amid optimism over China coronavirus

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Reuters
KEY POINTS
  • Brent futures rose by 98 cents, or 1.8%, to $56.26 a barrel by 0311 GMT, having risen 2.4% in the last session.
  • U.S. West Texas Intermediate (WTI) futures gained $1.08, or 2.1%, to $51.83 a barrel after rising 2.3% on Wednesday.
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Oil production in Azerbaijan
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Oil futures rose for a second day on Thursday amid investor optimism over unconfirmed reports of possible advances in combating the coronavirus outbreak in China as a sign fuel demand may rebound in the world’s biggest oil importer.

Brent futures rose by 98 cents, or 1.8%, to $56.26 a barrel by 0311 GMT, having risen 2.4% in the last session. U.S. West Texas Intermediate (WTI) futures gained $1.08, or 2.1%, to $51.83 a barrel after rising 2.3% on Wednesday.

A committee that advises the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, a group known as OPEC+, is set to meet for a fourth day on Thursday. They are discussing whether to reduce oil production further to support prices after a multi-day slump over concerns about economic growth and energy demand caused by the outbreak.

“Oil markets are rebounding from the 5-day slide as investors turn optimistic that OPEC+ officials will deliver an appropriate response to … the spread of the coronavirus,” said Stephen Innes, chief market strategist at AxiCorp.

The Joint Technical Committee for OPEC+ has been meeting this week to consider increasing output cuts by an additional 500,000 barrels per day or to extend current cuts beyond March. OPEC+ ministers are due to meet on March 5 and 6.

Oil prices have slumped more than 20% since reaching their highest this year on Jan. 8 on demand concerns caused by the virus outbreak and oversupply indications.

A technical market indicator known as the relative strength index, which measures buying and selling momentum, suggests that prices have fallen too far, too fast and investors may be buying futures in response.

In the last two days, commodities, equities and other markets have been buoyed by unconfirmed reports of a possible advance in producing treatment drugs for the coronavirus that has shut down transport and limited industrial activity in China.

However, the World Health Organization has played down the reports of “breakthrough” drugs being discovered.

A further 73 people on the Chinese mainland died on Wednesday from the virus, the highest daily increase since the outbreak started, and another 3,694 new cases were reported, raising the total to 28,018.

Commodity supply chains in China have been disrupted to the extent that short-term sales of crude oil, along with liquefied natural gas, fell to nearly zero this week.

Buyers in China, the world’s biggest importer of most commodities, are considering taking legal action to avoid honoring purchase agreements.

In the U.S., gasoline stockpiles dropped last week, counter to analysts’ expectations for a gain, and diesel inventories fell more than expected, the Energy Information Administration reported. However, crude stockpiles rose by a more-than-expected 3.4 million barrels last week to 435 million barrels.

Oil falls for sixth day as China virus raises global growth, demand concerns

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Reuters
KEY POINTS
  • Brent crude was down 37 cents, or 0.6%, to $58.95 at around 0348 GMT, after touching a three-month low on Monday at $58.50, as the virus outbreak triggered a global sell-off in riskier assets.
  • U.S. West Texas Intermediate was down 29 cents, or 0.6%, at $52.85, after slipping to its lowest since early October in the previous session at $52.13.
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Rusted out “pump-jacks” in the oil town of Luling, Texas.
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Oil futures fell for a sixth session on Tuesday as the spread of a new virus in China and several countries raised concerns about a hit to economic growth and oil demand.

Brent crude was down 37 cents, or 0.6%, to $58.95 at around 0348 GMT, after touching a three-month low on Monday at $58.50, as the virus outbreak triggered a global sell-off in riskier assets.

U.S. West Texas Intermediate was down 29 cents, or 0.6%, at $52.85, after slipping to its lowest since early October in the previous session at $52.13.

The United States warned against travel to China and other countries put out advisories as the death toll from the spreading coronavirus outbreak rose to more than 100 people and left millions of Chinese stranded during the biggest holiday of the year.

Oil investors are concerned travel advisories, other restrictions and any sizable impact on growth in the world’s second-biggest economy and elsewhere will dampen demand for crude and its products, amid plentiful supply.

“The near-term potential of a nationwide travel shutdown is high,” said Ian Bremmer, president of Eurasia Group, a political and market risk consultancy.

Barclays said oil prices could be $2 below its forecasts of Brent to be $62 a barrel over 2020 and $57 a barrel for WTI.

The bank expects the grouping known as OPEC+ to take further steps to support the market when it meets in March if demand lags its forecast of between 600,000 and 800,000 barrels per day (bpd) in the first quarter of 2020.

“While it remains to be seen how quickly the spread of the virus is contained, experience from the 2003 SARS outbreak suggests demand worries are likely overdone,” the bank said.

The Organization of the Petroleum Exporting Countries (OPEC), has been trying to play down the fallout from the virus, while Saudi Arabia, its de-facto leader, said on Monday the group could respond to any changes in demand.

OPEC and producers including Russia, known as OPEC+, have been cutting supply to support oil prices for nearly three years and recently agreed to withhold a further 500,000 barrels bpd to 1.7 million bpd through March.

Underlining the supply concerns, a Reuters poll forecast U.S. crude stockpiles to have risen last week.

Oil climbs but still set for big weekly loss over demand worries

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Reuters
KEY POINTS
  • Brent crude oil futures rose 28 cents, or 0.5%, to $57.99 a barrel by 0450 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.6%, to $52.74.
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The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
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Oil futures were higher ahead of the weekend but remained on track for large weekly losses on fears that slower global economic growth will hurt fuel demand, even as Saudi Arabia said it has fully restored oil output after recent attacks.

Brent crude oil futures rose 28 cents, or 0.5%, to $57.99 a barrel by 0450 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.6%, to $52.74.

“Asia will probably see some buying emerge over the session as traders hedge potential weekend geopolitical risk, although the session should be quiet with China still on holiday,” said Jeffrey Halley, a senior market analyst at OANDA in Singapore.

For the week, Brent futures were down 6.3%, marking its largest weekly loss since July. WTI was down 5.7% for the week, also its biggest decline since July.

“The recovery from the initial sell-off looked more a case of hope rather than reality,” said Halley.

Weak U.S. services sector and jobs growth data on Thursday added to worries about global oil demand and exacerbated fears that a protracted U.S.-China trade war could push the global economy into a recession.

“Concerns about global oil demand are rising, and next week’s U.S.-China trade talks, the significant X factor, will be particularly important, given the sharp drop in the oil price over the last week,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, also said on Thursday the world’s top crude oil exporter has fully restored oil output after attacks on its facilities last month knocked out more than 5% of global oil supply.

“The mood wasn’t helped by news that Saudi Arabia has managed a speedy recovery from the recent attacks,” ANZ Bank said in a note on Friday.

Recent data showing a slowdown in U.S. shale output and drilling activity, however, could lend some support.

“Continued falls in drilling activity has seen monthly growth in U.S. shale oil output fall, from 150 thousand barrels per day (kbpd) to only 50 kbpd,” said ANZ.

“This is likely to linger well into 2020.”

Oil steadies in rebound after jitters over economic outlook, US inventories

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Reuters
KEY POINTS
  • Brent crude oil futures edged 10 cents higher, or 0.2%, to $57.79 a barrel by 0209 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 23 cents, or 0.4%, to $52.87 a barrel.
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A man working in a filling station of Sinopec, China Petroleum and Chemical Corporation, in Shanghai, China, on March 22, 2018.
Johannes EIsele | AFP | Getty Images

Oil futures rebounded on Thursday, reversing losses earlier in the day, as fears over the worsening global economic outlook that hit prices hard in the previous session gave way to modest hopes for progress in resolving the U.S.-China trade war.

Brent crude oil futures edged 10 cents higher, or 0.2%, to $57.79 a barrel by 0209 GMT, after tumbling 2% in the previous session.

U.S. West Texas Intermediate (WTI) crude futures were up 23 cents, or 0.4%, to $52.87 a barrel, after sinking by 1.8% on Wednesday.

“What’s impossible to ignore is the economic realities being signalled in the latest run of doom and gloom financial market data which offers few if any reason for oil investors to be optimistic over the outlook for global demand,” said Stephen Innes, market strategist, SPI Asset Management.

World equity benchmarks hit their lowest levels in a month on Wednesday as signs of a slowdown in U.S. economic growth and weak earnings in Europe fanned fears the global economy could slip into recession.

Still, Wednesday’s slide to near two-month oil price lows proved an attractive enough buying opportunity for some.

“While the near-term triggers may continue to relate to oil demand, next week U.S.-China trade talks remain the unknown variable which could lend a modicum of support,” said Innes.

Also hurting sentiment in the previous session was U.S. crude inventories rising 3.1 million barrels last week, according to the country’s Energy Information Administration, far exceeding analyst expectations for an increase of 1.6 million barrels.

Brent futures are now well below levels seen before the Sept. 14 attacks on Saudi Arabia oil facilities that briefly halved more than half the kingdom’s output.

“The market is clearly fixated on the potential impact of weak economic growth on oil demand, with supply side issues taking a back seat for the moment,” said ANZ.

Oil declines on global demand worries despite hopes on trade talks

CNBC

Reuters
KEY POINTS
  • Brent crude was down 18 cents, or 0.3%, at $60.20 a barrel by 0442 GMT.
  • U.S. West Texas Intermediate (WTI) was off by 14 cents, or 0.3%, at $54.95.
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Oil futures fell on Friday as concerns about global growth and slowing demand lingered despite hints of progress on U.S.-China trade talks, setting up prices for weekly losses after days of swinging back and forth.

Brent crude was down 18 cents, or 0.3%, at $60.20 a barrel by 0442 GMT, while U.S. West Texas Intermediate (WTI) was off by 14 cents, or 0.3%, at $54.95.

Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five. U.S. crude has traded similarly and is heading for its first loss in three weeks.

Gloom over the economic impact of the trade dispute between Washington and Beijing has left investors shrugging off a strong commitment from Organization of the Petroleum Exporting Countries (OPEC) producers to trim output.

“Again it is a battle between the forces of OPEC and those of slowing global growth and thus demand,” said Greg McKenna, strategist at McKenna Macro.

The weak confidence in the markets was reflected by economists in a Reuters poll who predicted the U.S.-China trade spat will worsen or at best stay the same over the coming year.

Nearly 80% of more than 60 economists said U.S.-China trade relations would either worsen or stay the same by the end of next year. The median probability of a U.S. recession in the next two years held at a high of 45%, and the chance of one in the next 12 months held at 30%.

Still, President Donald Trump said on Thursday he would not rule out an interim deal with China on trade, though he prefers a comprehensive agreement.

Asian stocks advanced on Friday on the signs of progress in U.S.-China trade talks, while aggressive stimulus from the European Central Bank also helped counter worries about a global economic slowdown.

In oil markets, however, concern over whether Trump can achieve progress on the trade dispute has overshadowed OPEC’s Thursday agreement to trim output by asking members Iraq and Nigeria to bring their production back in line with targets.

OPEC is striving to prevent a glut amid soaring U.S. production and a slowing global economy.

OPEC+ has over-complied on average with its agreed cut of 1.2 million barrels per day (bpd) as Iranian and Venezuelan exports collapsed due to sanctions.

“With OPEC’s production curbs and ongoing constraints on sanctioned countries, we see the market tightening in Q4 2019. This should help stabilise prices,” ANZ Research said in a note.

“However, trade tensions and reduced risk of tougher sanctions on Iran and Venezuela will limit the upside,” it said.

Those trade tensions are hitting the shipping sector as the flow of goods and commodities slows, the International Energy Agency said on Thursday.

That will lead to weaker growth than previously expected in oil demand from the shipping sector next year despite a shift to cleaner fuel, the agency said.