Oil jumps on expectations that producers may cut supply after slump

CNBC

Reuters
KEY POINTS
  • Brent crude had rebounded to $57.75 a barrel, up $1.52, or 2.7%, from its last close by 0401 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures jumped $1.51, or 2.96%, to $52.60 a barrel.
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Idled oil well pump jacks sit in the yard at Wood Energy Inc. in Woodlawn, Ill, Jan. 20, 2015.
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Oil futures jumped more than $1 a barrel on Thursday, recovering half of the nearly 5% losses in the previous session, on expectations that lower prices may lead to production cuts.

Brent crude had rebounded to $57.75 a barrel, up $1.52, or 2.7%, from its last close by 0401 GMT, while U.S. West Texas Intermediate (WTI) crude futures jumped $1.51, or 2.96%, to $52.60 a barrel.

Both contracts hit their lowest levels since January on Wednesday after a surprise build in U.S. crude inventories added to worries that the China-U.S. trade war could further dampen demand growth this year.

Analysts said that crude prices were moving higher on the expectation that Saudi Arabia, the world’s biggest oil exporter, and other producers in the Organization of the Petroleum Exporting Countries (OPEC) may take action to support the market by reducing supply.

“The threshold is $60 a barrel and if you go below that for a significant period of time, I would expect supplies to be taken off the market in order to support prices up,” said Virendra Chauhan, an oil analyst at Energy Aspects in Singapore.

Bloomberg in a report on Wednesday cited a Saudi official saying that the country is in talks with other producers to take action to halt the oil price slide.

“Trade war rhetoric will continue to guide markets, but the comments from Saudi Arabia could lead to unprecedented action to stabilize prices,” said Alfonso Esparza, a Toronto-based senior market analyst at Oanda.

“It is hard to imagine what that would look like given how hard it was to get the OPEC+ to agree to the production limit agreement, but given the potential free fall from crude if the trade war continues, no option is off the table,” he said, referring to OPEC+, a group including OPEC and non-OPEC producers such as Russia.

Esparza added that a weaker U.S. dollar has also lent support to the oil price rebound.

The dollar index, which measures the greenback against six other major currencies, has declined 1% since July 31, the day before the United States escalated its trade dispute with China by vowing to impose more tariffs, setting in motion retaliatory steps by China.

Oil prices mixed amid US-China trade impasse

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) futures were at $61.58 per barrel, down 9 cents, or 0.2% at 0223 GMT, from their previous settlement. WTI closed the last session steady on the day.
  • Meanwhile Brent crude futures were at $70.73 a barrel, up 11 cents, or 0.2%, from their last close. Brent ended the previous session little changed.
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Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
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Oil futures were mixed on Monday, with U.S. crude edging lower, as investors and traders fretted over global economic growth prospects amid a standoff in Sino-U.S. trade talks.

U.S. West Texas Intermediate (WTI) futures were at $61.58 per barrel, down 9 cents, or 0.2% at 0223 GMT, from their previous settlement. WTI closed the last session steady on the day.

Meanwhile Brent crude futures were at $70.73 a barrel, up 11 cents, or 0.2%, from their last close. Brent ended the previous session little changed.

The trade conflict between the world’s top two economies escalated on Friday, with the United States hiking tariffs on $200 billion worth of Chinese goods after President Donald Trump said Beijing “broke the deal” by reneging on earlier commitments made during months of negotiations.

The parties appeared at a deadlock over negotiations on Sunday as Washingtondemanded promises of concrete changes to Chinese law and Beijing said it would not swallow any “bitter fruit” that harmed its interests.

The United States and China together accounted for 34% of global oil consumption in the first quarter of 2019, data from the International Energy Agency showed.

“The US-China trade war is set to intensify, which will limit gains in prices,” said Abhishek Kumar, head of analytics at Interfax Energy in London.

“Market participants will closely watch China’s retaliatory steps in response to the imposition of additional US tariffs on Chinese goods,” Kumar said, adding the dispute “could be particularly detrimental to the growth in global oil demand”.

Separately, in an early indicator of future output, U.S. energy companies last week reduced the number of oil rigs operating for the third time in four weeks.

Drillers cut two oil rigs in the week to May 10, bringing the total count down to 805, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

The rig count has declined over the past five months as independent exploration and production companies cut spending on new drilling.

U.S. oil benchmark ends below $60 a barrel for first time in 2018

MarketWatch

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By

MyraP. Saefong

Markets/commodities reporter

NeandaSalvaterra

Oil futures fell for a sixth straight session on Friday, with the U.S. benchmark settling below $60 a barrel for the first time in 2018 to notch its biggest weekly loss in more than a year.

Data released Friday revealed the biggest weekly jump in the number of U.S. oil-drilling rigs since January 2017, contributing to concerns about a surge in U.S. production.

March West Texas Intermediate crude CLH8, -3.43% dropped $1.95, or 3.2%, to settle at $59.20 a barrel on the New York Mercantile Exchange. Prices saw their lowest finish since Dec. 22. For the week, it was down roughly 9.6%, which was the biggest such decline since January 2016.

April Brent crude LCOJ8, -3.24% the global oil benchmark, fell $2.02, or 3.1% to end at $62.79 a barrel on London’s ICE Futures exchange. Brent, which settled at its lowest since Dec. 13, retreated roughly 8.4% this week.

Baker Hughes BHGE, -3.64%  on Friday reported that the number of active U.S. rigs drilling for oil jumped by 26 to 791 this week. That marked a third straight week of increases and the largest weekly rise in more than a year.

This offers a “path for much more than a million barrels a day U.S. production increase this year, but prices will need to remain above $50,” said James Williams, energy economist at WTRG Economics. “Not a good Friday for OPEC.”

Until recently, oil prices have been buoyed by production cuts from the Organization of the Petroleum Exporting Countries and other large producers among other threats to supply.

However, OPEC member Iran also plans to raise its oil production in the next four years, according to a report from Reuters.

That has “added to market fears of an increase in global supplies,” said Mihir Kapadia, chief executive officer and founder of Sun Global Investments. “With reports suggesting China could be launching its crude oil futures contract next month, traders could be looking to the Far East to see how such a move could affect global prices.”

Oil-market fundamentals are also changing as recent increases in prices provided incentive for the U.S. to crank up output.

In a monthly report this week, the Energy Information Administration forecast record U.S. crude production of 10.59 million barrels a day this and 11.18 million barrels a day next year. A separate report from the agency also revealed that daily domestic output topped 10 million barrels a day last week—the highest such figure based on EIA records dating back to 1983.

Meanwhile, the downturn in the oil market has come amid a recent selloff in the equity markets, as investors there fret about the potential for higher inflation and central bank action. Stocks in Europe and Asia were on pace on Friday for their worst week in two years after a late slump Thursday pushed the Dow Jones Industrial Average DJIA, +1.38%  and S&P 500 SPX, +1.49%  into correction territory. U.S. stocks saw volatile Friday, with the Dow was set for a weekly loss of nearly 6%.

In other energy dealings, March gasoline RBH8, -3.66%  dropped 3.7% to $1.70 a gallon, with prices suffering a weekly loss of 9.2%, while March heating oil HOH8, -3.66%  lost 3.5% to $1.855 a gallon—down about 9.7% on the week.

March natural gas NGH18, -3.41%  fell 4.2% to $2.584 per million British thermal units, its lowest finish since late February 2017, for a weekly decline of 9.2%.

—Sara Sjolin contributed to this article