Oil prices slides as U.S. crude stockpile growth heightens oversupply fears

CNBC

Reuters
KEY POINTS
  • Brent crude was down 29 cents, or 0.7%, at $42.34 a barrel by 0335 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures fell 35 cents, or 0.9%, to $40.02 a barrel.
Oil pumping jacks, also known as "nodding donkeys", operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Oil pumping jacks, also known as “nodding donkeys”, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil futures dropped on Wednesday, extending losses from the previous day, after U.S. crude stockpiles grew more than expected, adding to worries about oversupply.

Brent crude was down 29 cents, or 0.7%, at $42.34 a barrel by 0335 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 35 cents, or 0.9%, to $40.02 a barrel.

U.S. crude inventories rose by a much bigger than expected 1.7 million barrels last week, according to industry group the American Petroleum Institute (API), well ahead of analysts’ expectations for a 300,000-barrel build.

However, U.S. gasoline and distillate inventories fell, the data showed, feeding optimism that fuel consumption is picking up as some economies ease lockdowns imposed to contain the coronavirus pandemic.

U.S. government data will be released on Wednesday.

“Some investors took profits after the recent rally as they saw higher U.S. crude stockpiles,” Chiyoki Chen, chief analyst at Sunward Trading said.

On Tuesday, both Brent and WTI contracts traded at their highest levels since prices collapsed in early March.

Global oil consumption has started to recover as economies emerge from lockdown, while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers — a grouping known as OPEC+ — have slashed output and U.S. shale producers have shut in wells.

Still, the market remains concerned about a rising number of coronavirus cases in the United States and elsewhere, said Kazuhiko Saito, chief analyst at Fujitomi Co.

New cases of Covid-19 rose 25% in the United States in the week ended June 21 and the death toll in Latin America passed 100,000 on Tuesday, according to a Reuters analysis and tally.

China, the world’s top crude importer, is also expected to slow crude imports in the third quarter, after record purchases in recent months, as higher oil prices hurt demand and refiners worry about a second virus outbreak.

“We expect Brent to be traded between $35-45 a barrel for the next week as concerns over a second wave of the coronavirus pandemic will limit gains, while reduced supply from OPEC+ will lend support,” Sunward’s Chen said.

Oil prices climb as Saudi Arabia pledges further production cut

CNBC

Reuters
KEY POINTS
  • Brent crude futures climbed to a high of $30.11 a barrel and were up 0.8%, or 24 cents, at $29.87 at 0206 GMT, reversing some of the previous session’s losses. The benchmark fell $1.34 on Monday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 1.6%, or 38 cents, at $24.52 after touching a high of $24.77.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil futures rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June to help drain the glut in the global market that has grown as the coronavirus pandemic crushed fuel demand.

Brent crude futures climbed to a high of $30.11 a barrel and were up 0.8%, or 24 cents, at $29.87 at 0206 GMT, reversing some of the previous session’s losses. The benchmark fell $1.34 on Monday.

U.S. West Texas Intermediate (WTI) crude futures were up 1.6%, or 38 cents, at $24.52 after touching a high of $24.77.

Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” Stephen Innes, chief global market strategist at AxiCorp, said in a note. OPEC+ is a group comprised of members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia.

The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total.

Still, the moves to deepen cuts raised questions for some about why the further cuts were needed.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?’” said Vivek Dhar, Commonwealth Bank’s mining and energy economist.

The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.

However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of Covid-19 cases spurring renewed lockdowns.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” said Commonwealth Bank’s Dhar.

Inventory data this week will be key to extending the recent rally in oil prices, analysts said.

U.S. crude inventories likely rose by about 4.3 million barrels in the week to May 8, a preliminary Reuters poll showed, ahead of reports from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday.

Oil rises, extending gains amid optimism over China coronavirus

CNBC

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.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

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

CNBC

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.
Reusable: Rusted oil jacks Texas 150326
Rusted out “pump-jacks” in the oil town of Luling, Texas.
Getty Images

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

CNBC

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.
GP: Tullow Oil 190812 EU
The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
Nicky Loh | Bloomberg | Getty Images

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.”