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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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.
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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

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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.

Oil hits six-week high on hopes of extended OPEC output cuts

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Reuters
KEY POINTS
  • Brent was up 26 cents, or 0.4%, at $62.85 a barrel by 0349 GMT.
  • U.S. crude was 27 cents, or 0.5%, higher at $58.12 a barrel.
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Oil futures hit a six-week high on Tuesday, rising for a fifth day on optimism that OPEC and other countries may agree to extend production cuts in a bid to support prices.

Brent was up 26 cents, or 0.4%, at $62.85 a barrel by 0349 GMT, while U.S. crude was 27 cents, or 0.5%, higher at $58.12 a barrel. Brent touched its highest since Aug. 1, while U.S. crude rose to the highest since July 31.

U.S. oil gained more than 2% on Monday, while Brent finished the day 1.7% higher as the market reacted to the appointment by Saudi Arabia’s king of his son, Prince Abdulaziz bin Salman, as energy minister on Sunday.

Prince Abdulaziz, a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC), said the pillars of Saudi Arabia’s policy would not change and a global deal to cut oil production by 1.2 million barrels per day would be maintained.

He added that the so-called OPEC+ alliance, made up of OPEC and non-OPEC countries including Russia, would be in place for the long term.

A meeting of OPEC and OPEC+ countries in Abu Dhabi this week “is stirring up hopes for additional supply cuts,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Still, Russia’s oil output in August exceeded its quota under the OPEC+ agreements.

“Markets will need to see concrete progress on the production front, even as the world’s economy slows, to sustain gains,” said Jeffrey Halley, senior market analyst at OANDA.

Should oil end Tuesday higher it will be the longest run of gains since late July but headwinds remain as the U.S.-China trade war rumbles on.

Executives at the annual Asia Pacific Petroleum Conference said on Monday they expect oil prices this year to be pressured by uncertainties surrounding the global economy, the U.S.-China trade war and increasing U.S. supplies.

In the United States, crude stockpiles are likely to have fallen for a fourth consecutive week last week, a preliminary Reuters poll showed on Monday.

Five analysts polled by Reuters estimated, on average, that crude inventories fell 2.6 million barrels in the week to Sept 6.

Oil jumps on expectations that producers may cut supply after slump

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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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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.