Oil firm near 4-year high as Washington’s Iran sanctions loom

CNBC

  • Washington’s Iran oil export sanctions to start Nov. 4.
  • OPEC seen to have little spare capacity to fill Iran loss.
  • High oil price to weigh on growth — HSBC.

Oil markets were firm on Tuesday, with Brent crude prices holding near four-year highs reached the previous day as markets adjust to the prospect of tighter supply once the U.S. sanctions against Iran kick in next month.

International benchmark Brent crude oil futures were at $85.02 per barrel at 0255 GMT, up 4 cents from their last close, and not far off the $85.45 peak reached in the previous session, the highest since November 2014.

Brent has risen by around 20 percent from the most recent lows in August.

U.S. West Texas Intermediate (WTI) crude futures were up 24 cents, or 0.3 percent, at $75.54 a barrel.

WTI is up by about 17 percent since mid-August.

Sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a $1.2 trillion a year open-trade zone that had been about to collapse.

More fundamentally, oil markets have been pushed up by looming U.S. sanctions against Iran’s oil industry, which at its most recent peak this year supplied almost 3 percent of the world’s almost 100 million barrels of daily consumption.

Trade data in Refinitiv Eikon showed Iran’s seaborne exports in September were just 1.9 million barrels per day, the lowest level since mid-2016.

“Oil prices continue to climb, supported by the nearing Iran embargo and related supply concerns,” said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.

“The supply situation looks fragile indeed, as any additional shortfall such as a deterioration of the situation in Venezuela would tighten oil supplies.”

HSBC said in its fourth quarter Global Economics outlook that “our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel.”

Washington’s sanctions are set to start on Nov. 4, and analysts say there may not be enough spare production capacity in the short-term to meet demand, potentially requiring large storage drawdowns.

“The camp of believers that $100 oil could be reached continues to expand, with spare capacity concerns continuing to grow,” said Brian Kessens, managing director at investment services firm Tortoise.

The Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member, has struggled to replace export falls from Iran, according to a Reuters survey published on Monday.

With crude prices soaring and many currencies in emerging markets, including India’s rupee and Indonesia’s rupiah declining, analysts warn that economic growth may be eroded.

“U.S. (fiscal) tightening, higher oil prices and ongoing trade frictions are all taking their taking their toll on the growth outlook,” HSBC said.

Oil prices inch up amid looming Iran sanctions and rising global supply

CNBC

  • Oil prices firmed on Wednesday as the prospect of upcoming U.S. sanctions on Iran was kept in check by rising supply outside of the Organization of the Petroleum Exporting Countries.
  • As the impending U.S. sanctions on Iran in November loom, crude buyers have reduced their orders from Tehran.

Oil markets were stable on Wednesday, buoyed by falling supplies from Iran ahead of U.S. sanctions but held in check by rising production outside the Organization of the Petroleum Exporting Countries.

International Brent crude oil futures were at $76 per barrel at 0257 GMT, up 5 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 6 cents at $68.59 a barrel.

Traders said crude prices have been supported by the prospect of U.S. sanctions against Iran, which will start to target its oil industry from November.

Bowing to pressure from Washington, many crude buyers have already reduced orders from OPEC’s third-biggest producer.

Although Tehran is offering steep discounts, Iran’s August crude oil and condensate loadings are estimated at 2.06 million barrels per day (bpd), versus a peak of 3.09 million bpd in April, trade flows data on Thomson Reuters Eikon showed.

Another concern is crisis-struck OPEC-member Venezuela, where oil exports have dropped by half since 2016 to below 1 million bpd.

To stem tumbling output, Venezuelan state-run oil firm PDVSA said on Tuesday it had signed a $430 million investment agreement to increase production by 640,000 bpd at 14 oil fields, valuing the investment at $430 million. However, given the country’s political and economic instability, many analysts doubted whether this investment would go through.

Rising non-OPEC supply

Despite the risk of disruption especially from OPEC-countries like Venezuela, Iran, Libya and Nigeria, Bank of America Merrill Lynch said global supply could climb towards year-end.

“Heading into 4Q18, we expect rising non-OPEC oil production as supply outages abate and greenfield projects ramp up,” the U.S. bank said in a note to clients.

“Currently, non-OPEC supply outages are at a 15-month high of 730,000 barrels per day. However, nearly half of these volumes are in the process of being restored,” it said.

Adding to that will be new production in Canada, Brazil and from the United States, which the bank said “should provide a substantial boost to non-OPEC supplies” during the second-half of the year “taming upside pressures on Brent crude oil prices”.

Bank of America said it expected Brent prices to be in a $65 to $80 per barrel range “until Iran sanctions start to bite” in the first-half of 2019.

In the United States, crude oil inventories rose by 38,000 barrels to 405.7 million barrels in the week to Aug. 24, industry group the American Petroleum Institute said on Tuesday.

Official U.S. fuel inventory and crude production data will be published on Wednesday by the Energy Information Administration (EIA).

Brent crude oil rises for a sixth day as supplies tighten amid strong demand

CNBC

  • Oil markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), but the potential of renewed U.S. sanctions against Iran is also pushing prices higher.

Brent crude oil rose for sixth day on Tuesday, passing $75 a barrel, on expectations that supplies will tighten because fuel is rising at the same time the United States may impose sanctions against Iran and OPEC-led output cuts remain in place.

Brent crude oil futures climbed to as high as $75.20 a barrel in early trading on Tuesday, the highest since Nov. 27, 2014. Brent was still at $75 a barrel at 0311 GMT up 29 cents, or 0.4 percent, from its last close.

Brent’s six-day rising streak is the most since a similar string of gains in December and it is up by more than 20 percent from its 2018 low in February.

Oil Russia

Sergei Karpukhin | Reuters

U.S. West Texas Intermediate (WTI) crude futures were at $68.98 a barrel, up 34 cents, or 0.5 percent from their last settlement. On Thursday, WTI rose to as high as $69.56, the most since Nov. 28, 2014.

Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.

The potential of renewed U.S. sanctions against Iran is also pushing prices higher.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel.”

The United States has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.

“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.

OPEC’s efforts to tighten markets are being led by top exporter Saudi Arabia, where state-controlled oil firm Saudi Aramco is pushing for higher prices ahead of a partial listing planned for later this year or 2019.

“Oil strength is coming from Saudi Arabia’s recent commitment to get oil back up to between $70 to $80 per barrel as well as inventory levels that are back in the normal range,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.

One of the few factors that has limited oil prices from surging even more is U.S. production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.

As a result of its rising output, U.S. crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.

Oil markets tense after western strikes on Syria, rising US drilling weighs

CNBC

  • Oil fell 1 percent on Monday as markets opened following western air strikes in Syria over the weekend.
  • Oil markets also came under pressure from a rise in U.S. oil drilling activity.

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil fell 1 percent on Monday as markets opened following western air strikes in Syria over the weekend, while a rise in U.S. drilling for new production also dragged on prices.

The United States, France and Britain launched 105 missiles on Saturday, targeting what they said were three chemical weapons facilities in Syria in retaliation for a suspected poison gas attack in Douma on April 7.

Brent crude oil futures were at $71.85 per barrel at 0547 GMT, down 73 cents, or 1 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 57 cents, or 0.9 percent, at $66.82 a barrel.

Traders said markets in Asia began cautiously after the weekend strikes, with some relief that the move looked unlikely to escalate.

“In the wake of the coordinated attack on Syria, oil prices are significantly lower … (but) the impact appears to be compact and over,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

Oil markets also came under pressure from a rise in U.S. oil drilling activity.

U.S. energy companies added seven oil rigs drilling for new production in the week to April 13, bringing the total to 815, the highest since March 2015, energy services firm Baker Hughes said on Friday.

Despite this, Brent is still up more than 16 percent from its 2018 low in February, due to healthy demand and also because of conflict and tension in the Middle East.

Although Syria itself is not a significant oil producer, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

“Investors continued to worry about the impact of a wider conflict in the Middle East,” ANZ bank said.

Oil markets tense on Middle East crisis, US-China trade spat

CNBC

  • Oil markets remained tense on Thursday on concerns of a military escalation in Syria.
  • Prices were some way off Wednesday’s 2014 highs as bulging American supplies weighed.

Getty Images

Oil markets remained tense on Thursday on concerns over a military escalation in Syria, although prices remained some way off Wednesday’s highest since late 2014 as bulging American supplies weighed.

Ongoing trade disputes between the United States and China also kept markets on edge, traders said.

Brent crude futures were at $72.14 per barrel at 0536 GMT, up 8 cents, or 0.1 percent from their last close.

U.S. WTI crude futures were at $67.03 a barrel, up 21 cents, or 0.3 percent from their last settlement.

In China, Shanghai crude futures were also up, rising 8.9 yuan to 427.1 yuan ($68.03) per barrel, up 2.1 percent and with record volumes traded on the product that was only launched in late March.

Both Brent and WTI hit their highest since late 2014 of $73.09 and $67.45 per barrel on Wednesday, respectively, after Saudi Arabia said it intercepted missiles over Riyadh and U.S. President Donald Trump warned Russia of imminent military action in Syria.

“Geopolitical risks outweighed an unexpected rise in inventories in the U.S.,” ANZ bank said on Thursday.

Ongoing concerns of a prolonged trade dispute between the United States and China are also keeping markets on edge.

China lashed out at the United States on Thursday saying that the trade disputes, in which both sides have threatened to impose tariffs on imports of several products, were “single-handedly provoked by the U.S.” and that Beijing was prepared to escalate the spat if Washington did not back off from its threatened import tariffs.

The Chinese Commerce Ministry also said there had been no bilateral negotiations with the United States on the trade frictions.

Although markets are tense, supplies remain ample especially due to the United States.

U.S. crude oil inventories rose by 3.3 million barrels to 428.64 million barrels.

Meanwhile, U.S. crude oil production last week hit a fresh record of 10.53 million barrels per day (bpd), up by a quarter since mid-2016.

The United States now produces more crude than top exporter Saudi Arabia. Only Russia, at currently just under 11 million bpd, pumps out more.

“Barring any geopolitical shocks, we see limited upside potential for oil prices from current levels due to ongoing oversupply, mainly from the U.S. and Russia, and also a slowing demand growth outlook,” said Georgi Slavov, head of research at commodities brokerage Marex Spectron.