Oil prices fall into bear market on rising supply, economic concerns

CNBC

  • Both Brent and WTI have declined by around 20 percent since seeing four-year highs in early October.
  • One Reuters analyst said Brent could “slip further into a range of $68.59-$69.69 per barrel.”

Oil markets on Friday remained weak as rising supply and concerns of an economic slowdown pressured prices, with U.S. crude now down by around 20 percent since early October.

U.S. West Texas Intermediate (WTI) crude oil futures were at $65.60 per barrel at 0509 GMT, down 4 cents, or 0.1 percent from their last settlement. WTI is set to fall for a fifth week, down 4.1 percent so far this week.

Front-month Brent crude oil futures were at $70.69 a barrel, 4 cents above their last close. Brent is set for a 2.9 percent drop for the week, its fifth straight week of declines.

Both Brent and WTI have declined by around 20 percent from the four-year highs they reached in early October.

“Oil prices continue to decline and are now officially in a bear market, having declined 20 percent from their (October) peak,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Reuters technical commodity analyst Wang Tao said on Friday that “Brent oil may slide further into a range of $68.59-$69.69 per barrel.”

That would be the first time Brent has fallen below $70 since April.

Analysts said the main downward price pressure came from rising supply, despite the U.S. sanctions against Iran that were imposed this week, as well as concerns over an economic slowdown.

“As OPEC exports continue to rise, inventories continue to build which is putting downward pressure on oil prices,” analysts at Bernstein Energy said.

“A slowdown in the global economy remains the key downside risk to oil,” Bernstein added.

The decline in prices over the past weeks follows a rally between August and October when crude rose ahead of the re-introduction of sanctions against Iran’s oil exports on Nov. 5.

The sanctions, however, are unlikely to cut as much oil out of the market as initially expected as Washington has granted exemptions to Iran’s biggest buyers which will allow them to continue buying limited amounts of crude for at least another six months.

China National Petroleum Corp (CNPC) said on Friday it was continuing to take oil from Iranian oilfields in which it has ownership stakes.

“Our main cooperation with Iran is upstream investment. Lifting equity oil is recouping our investment there,” Hou Qijun, deputy general manager for CNPC, said on the sidelines of an industry event in Shanghai.

Bernstein Energy expects “Iranian exports will average 1.4-1.5 million barrels per day (bpd)” during the exemption period,” down from a peak of almost 3 million bpd in mid-2018.

Oil falls as investors wary of trade slowdown

CNBC

  • Oil markets remain tense ahead of impending U.S. sanctions against Iran’s crude exports, which are set to start next week.

Oil prices dipped on Monday amid cautious sentiment as a plunge in financial markets last week and dollar strength early this week underscored concerns that growth may be slowing, especially in Asia’s emerging economies.

Front-month Brent crude oil futures were trading down 39 cents, or 0.5 percent, at $77.23 a barrel at 0616 GMT.

U.S. West Texas Intermediate (WTI) crude futures were at $67.31 a barrel, down 28 cents, or 0.4 percent, from their last settlement.

Investors remained wary after hefty losses last week, while a stronger dollar on safe-haven buying puts pressure on the purchasing power of emerging markets.

“Cooling economic conditions and symptoms of softer international trade have exacerbated bearish conditions as (the) growth outlook dims,” said Benjamin Lu of brokerage Phillip Futures in Singapore.

Singapore-based ship tanker brokerage Eastport said stock prices were falling amid policy uncertainty, rising interest rates and disappointing earnings from some companies.

Financial market turmoil may “weigh on investment and consumer spending, reducing trade flows and ultimately hitting demand,” it said.

Hedge funds slashed their bullish wagers on U.S. crude in the latest week to the lowest level in more than a year, the U.S. Commodity Futures Trading Commission said on Friday.

The speculator group cut its combined futures and options position in New York and London by 42,644 contracts to 216,733 in the week to Oct. 23, the lowest level since September 2017.

There were also signs of a slowdown in global trade, with rates for dry-bulk and container ships – which carry most raw materials and manufactured goods – coming under pressure.

On the supply side, however, oil markets remain tense ahead of looming U.S. sanctions against Iran’s crude exports, which are set to start next week and are expected to tighten supply, especially to Asia which takes most of Iran’s shipments.

The tight market in Asia is visible in the low amount of unsold crude oil stored on tankers on waters around Singapore and southern Malaysia, the region’s main oil trading and storage hub.

Just four stationary supertankers are currently filled with crude oil, according to Refinitiv Eikon ship tracking data.

That’s down from around 15 a year ago, and from 40 in mid-2016 during the peak of the supply glut.

In North America, however, there is no oil shortage as U.S. crude oil production has increased by almost a third since mid-2016 to around 11 million barrels per day.

Production is set to rise further. U.S. drillers added two oil rigs in the week to Oct. 26, bringing the total count to 875, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

More than half of all U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, the country’s biggest shale oil formation.

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.