Oil gains amid Middle East tensions, US-China trade deal hopes

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Reuters

KEY POINTS
  • Brent crude futures were up 3 cents at $62.17 a barrel by 0330 GMT. They rose 2% on Tuesday.
  • U.S. West Texas Intermediate crude gained 12 cents to $54.02 a barrel. The U.S. benchmark surged 3.8% in the last session.
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Jason Reed | Reuters

Oil prices extended gains on Wednesday after rising in the previous session on rekindled hopes for a U.S.China trade deal and on the potential for conflict between the U.S. and Iran in the Middle East after tanker attacks there last week.

Brent crude futures were up 3 cents at $62.17 a barrel by 0330 GMT. They rose 2% on Tuesday.

U.S. West Texas Intermediate crude gained 12 cents to $54.02 a barrel. The U.S. benchmark surged 3.8% in the last session.

In a post on Twitter, U.S. President Donald Trump said preparations were starting for him to meet Chinese President Xi Jinping at the G20 summit in Osaka, Japan, next week.

That comes after talks to reach a broad deal on trade between the United States and China broke down last month after Washington accused the Chinese of backing away from previously agreed commitments.

Interaction between the two sides since then has been limited, and Trump has threatened, repeatedly, to slap more tariffs on Chinese products in an escalation that businesses in both countries want to avoid.

“Global demand for crude got a boost on expectations that trade talks are showing some positive signs following President Trump’s tweets,” said Edward Moya, senior market analyst at OANDA in New York.

Both oil benchmarks gave up earlier gains in the Asian session after data showed that Japan’s exports fell for a sixth straight month in May as China-bound shipments weakened, underlining the impact of the trade war.

Tensions in the Middle East after last week’s tanker attacks remain high, with Trump saying he was prepared to take military action to stop Iran having a nuclear bomb but leaving open whether he would sanction the use of force to protect Gulf oil supplies.

Fears of a confrontation between Iran and the United States have mounted since last Thursday’s attacks, which Washington has blamed on Tehran. Iran has denied involvement.

Iran said this week it would breach internationally agreed curbs on its stock of low-enriched uranium within 10 days, possibly paving the way for the country to develop a nuclear weapon, adding that European nations still had time to save a landmark nuclear deal.

The U.S. is deploying about 1,000 more troops to the Middle East for what Washington said were defensive purposes, citing concerns about a threat from Iran.

Market participants are also waiting for a meeting between the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, a group known as OPEC+, to decide whether to extend a supply reduction pact that ends this month.

OPEC and non-OPEC states are discussing holding meetings on July 10-12 in Vienna, a date range proposed by Iran, OPEC sources said on Tuesday. OPEC itself, however, is considering meeting on July 1-2 though it is still saying meeting will be held on June 25-26 on its website.

U.S. crude stocks also fell by 812,000 barrels last week to 482 million, industry group the American Petroleum Institute said on Tuesday.

The report from the government’s Energy Information Administration are due later on Wednesday.

Oil prices fall for second day on weak economic data

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Reuters

KEY POINTS
  • Brent crude futures were down 16 cents, or 0.3%, at $60.78 a barrel by 0215 GMT. They fell 1.7% in the previous session on concerns about slowing global growth.
  • U.S. West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.2%, at $51.92. They dropped 1.1% on Monday.
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Andrew Burton | Getty Images

Oil prices were falling for a second day on Tuesday, after more signs that global economic growth is being hit by U.S.China trade tensions, although losses were limited amid tensions in the Middle East after tanker attacks last week.

Brent crude futures were down 16 cents, or 0.3%, at $60.78 a barrel by 0215 GMT. They fell 1.7% in the previous session on concerns about slowing global growth.

U.S. West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.2%, at $51.92. They dropped 1.1% on Monday.

The New York Federal Reserve said on Monday that its gauge of business growth in New York state posted a record fall this month to its weakest level in more than 2-1/2 years, suggesting an abrupt contraction in regional activity.

U.S. business sentiment has sagged as tensions over trade have escalated between China and the United States and on signs of softness in the labor market.

“The (oil) market is in a rut and desperately in need of some robust economic data to get it out of this funk,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Oil prices have fallen around 20% since 2019 highs reached in April, in part due to concerns about the U.S.-China trade war and disappointing economic data.

U.S. President Donald Trump and China’s President Xi Jinping could meet at the G20 summit in Japan later this month. Trump has said he would meet Xi at the event, although China has not confirmed the meeting.

Putting further pressure on oil, the U.S. energy department said on Monday that shale oil output is expected to reach a record in July.

But tensions in the Middle East are likely to keep prices supported, analysts said.

Acting U.S. Defense Secretary Patrick Shanahan announced on Monday the deployment of about 1,000 more troops to the Middle East for what he said were defensive purposes, citing concerns about a threat from Iran.

Fears of a confrontation between Iran and the United States have mounted since last Thursday when two oil tankers were attacked, which Washington has blamed on Tehran. Iran has denied involvement.

Oil prices rise after tanker attacks stoke Middle East tensions

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Reuters

KEY POINTS
  • Brent futures had climbed 26 cents, or 0.4%, to $62.27 a barrel by 0314 GMT. They gained 1.1% on Friday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 17 cents, or 0.3%, at $52.68 a barrel. They rose 0.4% in the previous session.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
Getty Images

Oil prices rose on Monday after U.S. Secretary of State Mike Pompeo said Washington will take all actions necessary to guarantee safe navigation in the Middle East, as tensions mounted following attacks on tankers last week.

Brent futures had climbed 26 cents, or 0.4%, to $62.27 a barrel by 0314 GMT. They gained 1.1% on Friday.

U.S. West Texas Intermediate (WTI) crude futures were up 17 cents, or 0.3%, at $52.68 a barrel. They rose 0.4% in the previous session.

Prices had jumped as much as 4.5% on Thursday after the attacks on two oil tankers near Iran and the Strait of Hormuz.

It was the second time in a month tankers have been attacked in the world’s most important zone for oil supplies as tensions increase between the United States and Iran. Washington blamed Iran for Thursday’s attacks, prompting a denial and criticism from Tehran.

“We don’t want war. We’ve done what we can to deter this,” Pompeo said in an interview with Fox News Sunday, adding: “The Iranians should understand very clearly that we will continue to take actions that deter Iran from engaging in this kind of behaviour”.

Tensions between Iran and the United States have risen since U.S. President Donald Trump pulled out of a deal last year between Iran and global powers that aimed to curb Tehran’s nuclear ambitions in exchange for sanctions relief.

Iran has repeatedly warned it would block the Strait of Hormuz if it cannot sell its oil because of U.S. sanctions.

“Growing tensions in the Middle East remain a cause for concern as traders fear supply disruptions over an escalation towards militaristic conflicts,” said Benjamin Lu, an analyst at Phillip Futures in Singapore.

Also supporting prices were comments over the weekend by the Saudi energy minister, Khalid al-Falih, that OPEC would probably meet in the first week of July and he hoped it would reach an agreement on extending oil output curbs.

“We are hoping that we will reach consensus to extend our agreement when we meet in two weeks time in Vienna,” Falih told reporters while attending a G20 energy and environment ministerial meeting in Karuizawa, northwest of Tokyo.

The Organization of the Petroleum Exporting Countries plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 million barrels per day (bpd) from Jan. 1. The pact ends this month and the group meets in coming weeks to decide the next move.

U.S. energy companies also cut the number of oil rigs operating for a second week in a row, with production growth expected to slow as crude prices fell to near their lowest levels of the year.

Oil extends decline after slump on high inventories, demand outlook

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Reuters

KEY POINTS
  • Brent crude futures were down 6 cents, or 0.1%, at $59.91 a barrel by 0336 GMT after earlier rising slightly. Prices fell 3.7% on Wednesday to settle at $59.97, the international benchmark’s lowest close since Jan. 28.
  • U.S. West Texas Intermediate crude futures were down 8 cents, or 0.2%, at $51.06 a barrel. They fell 4% in the previous session to $51.14, the lowest close since Jan. 14.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices fell for a second day on Thursday, extending declines of as much as 4% in the previous session, on continued increases in U.S. crude stockpiles and concerns about lower demand growth.

Brent crude futures were down 6 cents, or 0.1%, at $59.91 a barrel by 0336 GMT after earlier rising slightly. Prices fell 3.7% on Wednesday to settle at $59.97, the international benchmark’s lowest close since Jan. 28.

U.S. West Texas Intermediate crude futures were down 8 cents, or 0.2%, at $51.06 a barrel. They fell 4% in the previous session to $51.14, the lowest close since Jan. 14.

“It was a brutal move, sheer panic,” said Stephen Innes, managing partner at Vanguard Markets.

The U.S. Energy Information Administration (EIA) on Wednesday reported crude stockpiles rose unexpectedly for a second week in a row, climbing 2.2 million barrels last week after analysts had forecast a decrease of 481,000 barrels.

At 485.5 million barrels, U.S. commercial stocks were at their highest since July 2017 and about 8% above the five-year average for this time of year, it said.

On Tuesday, the EIA cut its forecasts for 2019 world oil demand growth.

The negative outlook is prompting hedge fund managers to exit oil positions at the fastest rate since the fourth quarter of 2018 due to increasing fears about the health of the global economy.

The escalating trade war between the United States and China, the world’s two biggest oil consumers, is causing the most concern among oil analysts, with consultants and banks cutting their demand growth forecasts

Goldman Sachs said on Wednesday an uncertain macroeconomic outlook and volatile oil production from Iran and others could cause the Organization of the Petroleum Exporting Countries (OPEC) to roll over supply cuts it has enacted with other producers.

OPEC and non-member producers including Russia have limited their oil output by 1.2 million barrels per day this year to prop up prices.

OPEC is set to meet at the end of June though a meeting of the wider producers that agreed to the cuts, known as OPEC+, may not occur until early July.

While officials from some OPEC members have said that the larger OPEC+ group will likely roll over the cuts, Algeria has proposed increasing the reductions, according to four sources familiar with the matter.

However, Goldman believes the producers will maintain the current supply levels.

“Fundamental uncertainty on the current and forward states of the global oil market is high,” Goldman said.

“We believe that this will lead the group to roll forward its current agreement, with likely no change to country level quotas given the difficulty in determining required production levels in coming months,” the bank’s analysts said.

Oil falls more than 1% on weaker oil demand growth, surprise gain in US crude stocks

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Reuters

KEY POINTS
  • Brent crude futures, the international benchmark for oil prices, were down 87 cents, or 1.4%, at $61.42 a barrel by 0231 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were down 85 cents, or 1.6%, at $52.41 per barrel.
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Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices fell more than 1% on Wednesday, weighed down by a weaker oil demand outlook and a rise in U.S. crude inventories despite growing expectations of ongoing OPEC-led supply cuts.

Brent crude futures, the international benchmark for oil prices, were down 87 cents, or 1.4%, at $61.42 a barrel by 0231 GMT.

U.S. West Texas Intermediate (WTI) crude futures were down 85 cents, or 1.6%, at $52.41 per barrel.

The U.S. Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and U.S. crude oil production in a monthly report released on Tuesday.

The EIA lowered its 2019 world oil demand growth forecast by 160,000 barrels per day (bpd) to 1.22 million bpd and wound back its forecast for 2019 U.S. crude production to 12.32 million bpd, 140,000 bpd less than the May forecast.

A surprise increase in U.S. crude stockpiles also kept oil prices under pressure.

“Investors have been concerned about the recent rise in stockpiles in the U.S.,” ANZ bank said in a note.

U.S. crude inventories rose by 4.9 million barrels in the week ended June 7 to 482.8 million barrels, according to data from the American Petroleum Institute (API) on Tuesday. That compared with analysts’ expectations for a decrease of 481,000 barrels.

Official data from the Energy Information Administration (EIA) is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

Alongside concerns about rising supply, ongoing trade tensions between the United States and China, the world’s two biggest oil consumers, weighed on prices. U.S. President Donald Trump said on Tuesday he was holding up a trade deal with China.

“Oil prices have struggled to retain bullish gains as traders stay cautious over heightened geopolitical risks and persistent weakness in the global economic backdrop,” said Benjamin Lu, commodities analyst at Phillips Future in Singapore.

With the next meeting of the Organization of the Petroleum Exporting Countries (OPEC) set for the end of June, the market is eyeing whether the world’s major oil producers would prolong their supply cuts.

OPEC, along with non-members including Russia in a group called OPEC+, have limited their oil output by 1.2 million bpd since the start of the year to prop up prices.

The Energy Minister for the United Arab Emirates Suhail bin Mohammed al-Mazroui said on Tuesday that OPEC members were close to reaching an agreement on continuing production cuts.

OPEC is set to meet on June 25, followed by talks with its allies led by Russia on June 26. But Russia suggested a date change to July 3 to 4, sources within the group previously told Reuters.