Oil dips as Saudi Arabia pledges to play ‘responsible role’ in market

CNBC

  • Saudi Arabia has pledged to play a “responsible role” in energy markets despite the ongoing concern surrounding the killing of Saudi journalist Jamal Khashoggi.
  • U.S. sanctions against Iran’s crude exports are set to go into effect on Nov. 4.

Oil prices dipped on Tuesday after Saudi Arabia pledged to play a “responsible role” in energy markets, although sentiment remained nervous in the run-up to U.S. sanctions against Iran’s crude exports that start next month.

Front-month Brent crude oil futures were at $79.62 a barrel at 0427 GMT, down 21 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $69.26 a barrel, dropping 10 cents from their last settlement.

U.S. sanctions against Iran’s oil exports are due to kick off on Nov. 4.

Top crude oil exporter Saudi Arabia has pledged to keep markets supplied despite its increasing isolation over the killing of Saudi journalist Jamal Khashoggi.

There has been concern that just as markets tighten with the start of the U.S. sanctions against Iran, Saudi Arabia could cut crude supply in retaliation for potential sanctions against it over the Khashoggi killing.

Trying to dismiss such worries, Saudi Energy Minister Khalid al-Falih said on Monday that “there is no intention” for such action, and that Saudi Arabia would play a “constructive and responsible role” in world energy markets.

Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said a Saudi cutback would be self-defeating as “Saudi Arabia would… risk losing market share to other exporters while losing its reputation as a stable actor in the market.”

Despite this, Sukrit Vijayakar, director of energy consultancy Trifecta, said “markets are… weary of the impact of U.S. sanctions on Iran’s oil sector,” estimating the sanctions “could impact up to 1.5 million barrels per day of supply.”

J.P. Morgan said it raised its 2019 Brent price forecast by a whopping $20.50 per barrel to $83.50 saying this “bullish argument is strongly driven by tighter supply due to Iranian sanctions and declining spare capacity”.

Not everyone is so bullish. Shipping brokerage Eastport said crude prices were “expected to decline in coming months, as rising production in the U.S. offsets increasing global demand”.

U.S. crude oil production has climbed by almost a third since mid-2016 to around 11 million barrels per day, and rising drilling activity points to further increases.

Reflecting a cautious outlook, traders have been curbing their exposure to oil markets by shutting long positions in crude futures, with fund managers cutting their combined positions by a total of 187 million barrels in the last three weeks, according to exchange and regulatory data.

Oil rises on looming Iran sanctions, but US-China trade war caps gains

CNBC

  • U.S. sanctions on Iran’s oil sector are set to go into effect on Nov. 4.
  • An internal document reviewed by Reuters suggested that the Organization of Petroleum Exporting Countries was facing difficulty in adding barrels to the market.

Oil prices rose on Monday as markets were expected to tighten once U.S. sanctions against Iran’s crude exports are implemented next month.

Front-month Brent crude oil futures were at $79.96 a barrel at 0414 GMT, 18 cents above their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $69.32 a barrel, 20 cents above their last settlement.

The U.S. sanctions on the oil sector in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), are set to start on Nov. 4. The United States under President Donald Trump is trying to reduce Iranian oil export to zero to force the country to renegotiate an agreement on its nuclear program.

U.S. Treasury Secretary Steven Mnuchin told Reuters on Sunday that it would be harder for countries to get sanction waivers than it was during the previous Obama administration, when several countries, especially in Asia, received them.

OPEC agreed in June to boost supply to make up for the expected disruption to Iranian exports.

However, an internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.

Fatih Birol, executive director of the International Energy Agency (IEA), said on Monday that other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further.

Traders said oil consumers were stockpiling in anticipation of more disruptions.

“In China, higher seasonal demand and suspected stockpiling are occurring, while similarly the U.S. and the OECD continue building stockpiles ahead of potential supply disruptions this winter,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

Despite this, Innes said overall global oil supply was currently enough to meet demand.

U.S. drillers added four oil rigs in the week to Oct. 19, bringing the total count to 873, Baker Hughes energy services firm said on Friday, raising the rig count to the highest level since March 2015.

The U.S. rig count is an early indicator of future output. With activity rising again after months of stagnation, U.S. crude production is also expected to continue to rise.

Reflecting the changes to U.S. oil flows from the rising output and the increase in exports, the Intercontinental Exchange <ICE.N> said its new Permian West Texas Intermediate crude futures contract deliverable in Houston, Texas, will begin trading on Monday.

In addition to the potential for rising oil supply, the ongoing Sino-American trade dispute is expected to start dragging on demand.

“The full impact of the U.S.-China trade war will hit markets in 2019 and could act as a considerable drag on oil demand next year, raising the possibility of the market returning to surplus,” said Emirates NBD bank in a note.

Shipping brokerage Eastport said “Chinese manufacturing is beginning to slow” and that “Trump’s proposal of slapping…tariffs on additional…Chinese goods from 1 January would be a further drag on trade.”

Oil prices edge up, but set for weekly loss on stock build, trade row

CNBC

  • The U.S. crude futures and Brent crude futures contracts both increased on Friday but were on track for a second consecutive weekly decline.

Oil prices nudged higher on Friday on signs of surging demand in China, the world’s second-biggest oil user, though prices are set to fall for a second week amid concerns of the ongoing Sino-U.S. trade war is limiting overall economic activity.

Brent crude oil futures were trading at $79.51 per barrel at 0521 GMT, up 22 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 19 cents, or 0.3 percent, at $68.84 a barrel.

For the week, Brent crude was 1.1 percent lower while WTI futures were down 3.5 percent, putting both on track for a second consecutive weekly decline.

Refinery throughput in China, the world’s second-largest oil importer, rose to a record high of 12.49 million barrels per day (bpd) in September as some independent plants restarted operations after prolonged shutdowns over summer to shore up inventories, government data showed on Friday.

The refinery consumption may rise through the fourth quarter as several state-owned Chinese refiners return to service after maintenance.

Undermining the strong refinery data, China did on Friday report its weakest economic growth since 2009 in the third quarter, with gross domestic product expanding by only 6.5 percent, missing estimates.

The weak economic data raised concerns that the country’s trade war with United States is beginning to have an impact on growth, which may limit China’s oil demand.

The trade war concerns combined with surging U.S. oil stockpiles reported on Thursday are capping the day’s price gains.

U.S. crude stocks last week climbed 6.5 million barrels, the fourth straight weekly build, almost triple the amount analysts had forecast, the U.S. Energy Information Administration said on Wednesday.

“EIA Weekly Petroleum Status Report was a complete shocker sending Oil markets spiralling lower amidst some concerning development for oil bulls,” said Stephen Innes, head of trading APAC at OANDA in Singapore.

Inventories rose sharply even as U.S. crude production slipped 300,000 barrels per day (bpd) to 10.9 million bpd last week due to the effects of offshore facilities closing temporarily for Hurricane Michael.

Meanwhile, Iranian oil exports may have increased in October when compared to the previous month as buyers rush to lift more cargoes ahead of looming U.S. sanctions that kick in on Nov. 4.

An unprecedented volume of Iranian crude oil is set to arrive at China’s northeast Dalian port this month and in early November before U.S. sanctions on Iran take effect, according to an Iranian shipping source and data on Refinitiv Eikon.

So far, a total of 22 million barrels of Iranian crude oil loaded on supertankers owned by the National Iranian Tanker Co (NITC) are expected to arrive at Dalian in October and November, the data showed. Dalian typically receives between 1 million and 3 million barrels of Iranian oil each month, according to data that dates back to January 2015.

Oil prices edge up on surprise drawdown in US crude stockpiles

CNBC

  • U.S. crude inventories declined by 2.1 million barrels in the previous week, according to data from the American Petroleum Institute.

Oil prices extended gains into a fourth session on Wednesday, buoyed as industry data showed a surprise decline in U.S. crude inventories and as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries.

U.S. West Texas Intermediate crude was up 15 cents, or 0.2 percent, at $72.07 a barrel by 0255 GMT on Wednesday, having settled up 14 cents.

Brent crude was up 12 cents, or 0.2 percent, at $81.53 a barrel, after settling up 63 cents the session before. The global benchmark, which hit a more than two-week low late last week as equity markets dropped, is trading around $5 below a four-year high of $86.74 marked on Oct. 3.

U.S. crude inventories fell by 2.1 million barrels last week, compared with analyst expectations for a build of 2.2 million barrels, American Petroleum Institute data showed after Tuesday’s settlement.

“The market is reacting to the unexpected decline as inventories tend to rise at this time of year,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo, adding that anxieties about the outlook for the global economy were capping gains.

U.S. gasoline stocks dropped by a larger-than-expected 3.4 million barrels, while distillate fuel stockpiles declined by a smaller-than-expected 246,000 barrels, the API data showed.

Inventory data from the U.S. Energy Department’s Energy Information Administration is due at 1430 GMT on Wednesday.

U.S. President Donald Trump gave Saudi Arabia the benefit of the doubt in the disappearance of journalist Jamal Khashoggi even as U.S. lawmakers pointed the finger at the Saudi leadership and Western pressure mounted on Riyadh to provide answers.

Jim Ritterbusch, president of Ritterbusch and Associates, said Saudi Arabia could cut as much as 500,000 barrels per day of crude production “as a warning shot should the U.S. opt to impose any type of sanction in response to the Khashoggi developments”.

Meanwhile, OPEC Secretary-General Mohammad Barkindo on Tuesday urged oil producing companies to increase capacities and invest more to meet future demand as spare oil capacity shrinks worldwide.

The Russian government is no longer capping oil output increases by local producers, one of the country’s top energy companies, Gazprom Neft, said on Tuesday.

The market has been supported by reports that Iranian crude exports may be falling faster than expected ahead of Nov. 4, the date U.s. sanctions on the commodity are due to start.

Oil prices rise on signs Iranian crude exports are falling further in October

CNBC

  • Iran’s exports of 1.33 million barrels per day of crude oil in the first two weeks of October, according to data from Refinitiv Eikon.
  • Meanwhile, Saudi Arabia continues to face political pressure over the disappearance of journalist Jamal Khashoggi.

Oil prices rose on Tuesday on signs Iranian oil exports this month have fallen from September ahead of U.S. sanctions against Tehran that are set to start in November.

International benchmark Brent crude for December delivery rose 27 cents, or 0.33 percent, to $81.05 per barrel by 0325 GMT.

U.S. West Texas Intermediate crude for November delivery was up 12 cents at $71.90 a barrel.

Iran has exported 1.33 million barrels per day (bpd) to countries including India, China and Turkey in the first two weeks of October, according to Refinitiv Eikon data. That was down from 1.6 million bpd in September, the data showed.

The October exports are a sharp drop from the 2.5 million bpd exported in April before U.S. President Donald Trump withdrew from a multi-lateral nuclear deal with Iran in May and ordered the re-imposition of economic sanctions on the country, the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC).

The sanctions on Iran’s petroleum sector will go into effect on Nov. 4.

“Uncertainties will remain until Nov. 4 when it would be clear whether the United States would want to cut Iran oil exports to zero or grant waivers,” said Vincent Hwang, commodity analyst at NH Investment & Securities in Seoul.

“Brent prices are likely stay in the range of $80 a barrel or slightly higher, while WTI prices are likely to be $70-$75 a barrel,” Hwang added.

Crude prices have also been supported by geopolitical tensions caused by the disappearance of a Saudi Arabian journalist in Turkey. Turkish official have alleged Saudi Arabian intelligence officers killed the journalist Jamal Khashoggi on Oct. 2 at the Saudi consulate in Istanbul.

U.S. President Donald Trump threatened “severe punishment” for the kingdom if the journalist is found to have been killed. Trump dispatched Secretary of State Mike Pompeo to Saudi Arabia to meet with the country’s leader King Salman.

Saudi Arabia, the world’s largest oil exporter, has denied the allegation. Saudi Arabian officials said it would retaliate against any actions taken over the Khashoggi case.

With the world’s only sizable spare oil output capacity, Saudi Arabia is expected to export more to offset the loss of Iranian oil supply from the sanctions.

Saudi Arabia’s Energy Minister Khalid al-Falih said on Monday at a conference in New Delhi that the kingdom is committed to meeting India’s rising oil demand and is the “shock absorber” for supply disruptions in the oil market.

The country is preparing to admit to causing the death of Khashoggi, according to CNN and New York Times reports on Monday.

“For now, concerns around the disappearance of a Saudi Arabian national appear to be limited to the political sphere,” a Houston-based consultancy Stratas Advisors said in a note.

But WTI prices could fall in the back half of the week, weighed by an increase in U.S. crude inventories, the note said.

U.S. crude stockpiles were forecast to have risen for the fourth straight week by about 1.1 million barrels in the week ended Oct.12, according to a Reuters poll ahead of reports from the American Petroleum Institute (API) and the U.S. Department of Energy’s Energy Information Administration (EIA).

The API’s data is due for publication at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the EIA report is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.