Oil prices rise as China-US trade tensions show signs of easing

CNBC

  • Oil prices edged up on Thursday, buoyed by a draw down in inventories in the U.S. and by signs of easing trade tensions between Washington and Beijing.
  • Oil prices have also been supported by OPEC-led supply curbs announced last week, although gains have been muted after the producer group lowered its 2019 demand forecast.

Oil prices rose on Thursday, buoyed by a draw down in U.S. crude stockpiles and indications that China is taking concrete steps to put a trade war truce with Washington into action.

Crude oil prices have also been supported by OPEC-led supply curbs announced last week, although gains were capped after the producer group lowered its 2019 demand forecast.

International Brent crude oil futures were at $60.47 per barrel at 0442 GMT, up 32 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.35 per barrel, up 20 cents or, 0.4 percent.

In a sign that China is willing to lessen the trade tensions with United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday, helping investors breathe a sigh of relief across broader stock markets, and pushing oil prices up.

A drop in U.S. crude stocks also boosted oil, which has been riding higher on expectations that the OPEC-led planned output cuts would re-balance the market in 2019, analysts said.

U.S. crude inventories fell by 1.2 million barrels in the week to Dec. 7, compared with expectations for a decrease of 3 million barrels.

“The agreement of a reduction in output of 1.2 million barrels per day at last week’s OPEC meeting should see the market push into (supply) deficit in H1 2019,” ANZ analyst Daniel Hynes said.

“Rising U.S. output, weaker economic growth and the production cut agreement roll-off will see a balanced market in H2,” Hynes said. ANZ expects Brent to reach $75 a barrel in the first quarter of 2019.

The Organisation of the Petroleum Exporting Countries (OPEC) said demand for its crude in 2019 would fall to 31.44 million barrels per day (bpd), 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.

This adds to the concerns of several market watchers that the decision led by the group to cut production might not be enough to override a glut or push prices higher.

Oil market participants are concerned about the likelihood of weaker macroeconomic growth, which could rein in any expansion in oil demand, analysts said.

“If we do see a reduction in global growth risk, then we are monitoring increases in demand in combination with supply being absorbed,” said Hue Frame, portfolio manager at Frame Funds in Sydney.

“There are so many moving parts at the moment that it is difficult to provide a convincing forecast,” Frame said.

He added, however, that there is a significant upside to prices going forward.

Oil prices rise on Libyan export disruption, but markets remain weak

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  • Libya’s National Oil Company on Monday declared force majeure on exports from the country’s largest oilfield after it was seized by a local militia group over the weekend.
  • Despite the development, overall sentiment on oil prices remained weak.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices edged up on Tuesday after Libya’s National Oil Company declared force majeure on exports from the El Sharara oilfield, which was seized at the weekend by a local militia group.

Despite that, overall sentiment on oil prices remained weak amid worries over global stock markets and doubts that planned supply cuts led by producer club OPEC will be enough to rein in oversupply.

International Brent crude oil futures were at $60.19 per barrel at 0336 GMT, up 19 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.16 per barrel, up 16 cents, or 0.3 percent.

Libya’s National Oil Company (NOC) late on Monday declared force majeure on exports from the El Sharara oilfield, the country’s biggest, which was seized at the weekend by a militia group.

NOC said the shutdown would result in a production loss of 315,000 barrels per day (bpd), and an additional loss of 73,000 bpd at the El Feel oilfield.

The rise came after crude prices dropped by 3 percent the session before amid ongoing weakness in global stock markets and concerns that slowing oil demand-growth could erode supply cuts announced last week by the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia.

Crude futures have lost around a third of their value since early October amid the financial market slump and an emerging oil supply overhang.

In a show of no confidence, money managers cut their bullish wagers on crude to the lowest in more than two years in the week ending Dec. 4, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.

The financial speculator group cut its combined futures and options position in New York and London by 25,619 contracts to 144,775 during the period. That is the lowest level since Sept. 20, 2016.

In physical markets, Kuwait and Iran this week both reduced their January crude oil supply prices to Asia.

“There remains a lot of uncertainty if the production cut is thick enough to make a significant dent in global supply,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

“The general risk-off tone in global markets and the stronger dollar … are contributing to the selling pressure.”

The OPEC-led group of oil producers last Friday announced a supply cut of 1.2 million barrels per day (bpd) in crude oil supply from January, measured against October 2018 output levels.

US crude rises 2.2%, settling at $52.61, after OPEC and allies reach deal to cut output

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  • Oil prices jump after OPEC and its allies reach an agreement to slash production for the first six months of 2019.
  • OPEC producers agreed to cut output by 800,000 barrels per day, while allied nations including Russia will reduce production by 400,000 bpd.
  • The combined cut of 1.2 million bpd is in line with expectations and will take effect in January.

Here's the kind of deal OPEC could make

Here’s the kind of deal OPEC could make  

Oil prices surged higher on Friday after OPEC, Russia and several other producers reached an agreement to cut output next year in order to boost the market.

The new agreement comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis. Oil prices have dropped more than 30 percent from their highs in early October, hammered by concerns about oversupply, weakness in global markets and technical trading that exacerbated the slide.

OPEC and its allies agreed to throttle back output by 1.2 million bpd during the first six months of 2019.

The production cut is roughly in line with expectations heading into the meeting. Commodity watchers were expected the alliance to remove 1 million to 1.4 million bpd from the market.

Brent crude, the international benchmark for oil prices, rose $1.61, or 2.7 percent, to $61.67 a barrel. Brent earlier rose more than 5 percent to $63.73.

U.S. West Texas Intermediate crude futures ended Friday’s session up $1.12, or 2.2 percent, at $52.61 per barrel, off a session high of $54.22.

Energy research firm Wood Mackenzie forecasts the production cut will tighten markets by the third quarter of 2019 and cause Brent to rise back above $70 a barrel.

“It would help producers contend with the strength of US supply growth in 2019 when we expect a year-on-year increase of 2.4 million b/d in non-OPEC production as US supply continues to gain sharply,” said Ann-Louise Hittle, vice president of macro oils at Wood Mackenzie.

The United States is pumping at all time highs near 11.7 million bpd, according to preliminary government figures. Last week, the country exported more oil and refined fuels than it imported for the first time in decades.

Meanwhile, Russian production hit a post-Soviet era high at 11.4 million bpd this fall, and Saudi oil production rose to a record 11.1 million bpd in November.

The supply surge from the world’s top three oil producers is as forecasters warn oil demand growth will be softer than anticipated next year.

OPEC members agreed on Friday to cut production by 800,000 bpd, while non-OPEC producers aim to shave 400,000 bpd off the market.

Iranian oil minister confirms 1.2 million barrel oil cut

Iranian oil minister confirms 1.2 million barrel oil cut  

Top exporter Saudis Arabia will deliver the lion’s share of the OPEC cuts. Saudi Energy Minister Khalid al Falih on Friday said he expects the kingdom’s output to fall to 10.7 million bpd in December and 10.2 million bpd in January.

Russia’s pledge pencils out to a 228,000-230,000 bpd cut, Russian Energy Minister Alexander Novak said. However, Novak warned that Russia would reduce supply gradually due to climate conditions that affect its oil fields in the winter.

OPEC began capping supply in partnership with Russia and several other nations in January 2017 in order to end a punishing downturn in oil prices.

The alliance reversed course and agreed to hike output in June after it removed more barrels from the market than it intended, largely due to the ongoing free fall in Venezuelan output and supply disruptions in Libya.

The Trump administration lobbied for the midyear production increase as it prepared to restore sanctions on Iran, a policy that has pushed up oil prices throughout much of 2018. Trump has sought to blame OPEC for rising oil prices, ordering the cartel to take action to cut the cost of crude several times this year.

On Wednesday, Trump tweeted that he hoped OPEC would not restrict supply and instead keep oil flowing “as is.”

Oil drops as OPEC makes supply cut dependent on Russian support

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  • International Brent crude oil futures fell below $60 per barrel early in the session, trading at $59.50 per barrel at 0144 GMT.
  • The OPEC meeting in Vienna ended without an announcement of a decision to cut crude supply.
  • Oil producers have been hit by a 30-percent plunge in crude prices since October as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil prices fell on Friday, pulled down by OPEC’s decision to delay a final decision on output cuts, awaiting support from non-OPEC heavyweight Russia.

International Brent crude oil futures fell below $60 per barrel early in the session, trading at $59.50 per barrel at 0144 GMT, down 56 cents, or 0.9 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.24 per barrel, down 25 cents, or 0.5 percent.

The declines came after crude slumped by almost 3 percent the previous day, with the Organisation of the Petroleum Exporting Countries (OPEC) ending a meeting at its headquarters in Vienna, Austria, on Thursday without announcing a decision to cut crude supply, instead preparing to debate the matter on Friday.

“OPEC has decided to meet Friday again…(as) Russia remains the sticking point,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

Analysts still expect some form of supply reduction to be decided.

“We are beginning to witness the outline of the next iteration of production cuts, with OPEC conforming to cut its own production by around 1 million barrels per day, with the cartel lobbying non-OPEC members to contribute more,” Japanese bank MUFG said in a note.

Supply surge, price plunge

Oil producers have been hit by a 30-percent plunge in crude prices since October as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption.

That increase alone is equivalent to the output of major OPEC producer the United Arab Emirates.

The surge is largely down to soaring U.S. crude oil production, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the United States the world’s biggest oil producer.

As a result, the United States last week exported more crude oil and fuel than it imported for the first time on records going back to 1973, according to data released on Thursday.

Oil prices dip as stock markets slide, but trading tepid ahead of OPEC meeting

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  • OPEC is set to in Vienna, Austria, later on Thursday to decide its production policy.
  • Since early October, crude oil has lost around 30 percent of its value amid surging supply and concerns that an economic downturn will erode fuel demand.

Oil prices fell along with weak stock markets on Thursday, but trading was tepid ahead of a meeting by producer group OPEC that is expected to result in a supply cut aimed at draining a glut that has pulled down crude prices by 30 percent since October.

International Brent crude oil futures were at $61.04 per barrel at 0531 GMT, down 52 cents, or 0.8 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.38 per barrel, down 51 cents, or 1 percent.

Traders said oil prices were being weighed down by weak global financial markets, which saw stock markets tumble on Thursday.

Since early October, crude oil has lost around 30 percent of its value amid surging supply and fears that an economic downturn will erode fuel demand.

“A massive liquidation in long positions by money managers has dampened market confidence on oil prices considerably,” said Benjamin Lu of Singaporean brokerage Phillip Futures.

The Organisation of the Petroleum Exporting Countries (OPEC) is meeting at its headquarters in Vienna, Austria, on Thursday to decide its production policy.

Led by Saudi Arabia, OPEC’s crude oil production has risen by 4.1 percent since mid-2018, to 33.31 million barrels per day (bpd).

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by a 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption.

The increase alone is equivalent to the output of major OPEC producer United Arab Emirates.

Russia, a major oil producer but not a member of OPEC, will meet with the producer cartel on Friday to discuss production levels, and it is widely expected that a supply cut will be agreed.

“Markets…believe the production cut deal will be in range of 1-1.3 million bpd,” ANZ bank said on Thursday.