Oil prices gain as OPEC revises deficit forecast

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Reuters
KEY POINTS
  • Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.
  • West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.
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Oil field workers with Wisco work on a pump jack in North Dakota, the United States, on November 6, 2013.
Ken Cedeno | Corbis News | Getty Images

Oil prices edged higher on Thursday with the market mood switching to relief as OPEC forecast a supply deficit next year, from doom and gloom over data showing a surprise increase in U.S. crude inventories.

Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.

West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought — even before the latest pact with other producers to curb supply takes effect.

The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as U.S. production growth begins to slow.

Still, U.S. inventories are on the rise. Crude stockpiles last week rose unexpectedly, gaining more than 800,000 barrels, compared with a Reuters poll that forecast a 2.8 million barrel decline.

Inventories of petroleum products also increased with gasoline stocks surging by more than 5 million barrels and distillates gaining a bit over 4 million barrels — with both more than double expectations.

“The overall report was very bearish as demand fell off a cliff and total stockpiles climbed to the highest level in seven months,” said Edward Moya, senior market analyst at OANDA.

Beyond the balance between inventories and supply, investors are also awaiting news on negotiations between Washington and Beijing to end a long-running trade war and get an agreement before another round of U.S. sanctions kicks in.

The lingering battle between the world’s two biggest economies has hit global growth, in the process denting demand for crude and oil products.

U.S. President Donald Trump is expected to discuss tariffs on Chinese goods set to be imposed on Dec. 15 with top trade advisers as markets brace for fallout in China’s reaction.

“In the near-term, U.S.-China trade remains the primary catalyst and the 500-pound gorilla in the room,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Oil prices wilt on surprise build-up in US crude stocks

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Reuters
KEY POINTS
  • Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT.
  • U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.
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A photo taken on August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices fell on Wednesday after industry data showed an unexpected build in crude inventory in the United States and as investors waited for news on whether a fresh round of U.S. tariffs on Chinese goods would take effect on Sunday.

Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT. U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.

“At this time, everyone was expecting we would have strong draws in the inventory, but it was a build,” said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp.

U.S. crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.

Crude inventories rose by 1.4 million barrels in the week to Dec. 6 to 447 million, while analysts were expecting a fall of 2.8 million barrels.

The weekly EIA report is due later on Wednesday.

U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching fast.

With the market expected to be over-supplied next year on growing shale oil output and new projects coming on stream, any additional tariffs will dent demand and, in turn, prices, said Mitsubishi’s Nunan.

“The big question is how will the demand hold up?” he said.

“The demand slowdown in growth, a lot of it seems to be coming from the (U.S.-China) trade war. If tariffs go into effect, sentiments will turn bearish again.”

The U.S. is on track to become a net exporter of crude and fuel for the first time on record on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.

Also adding to global supply, U.S. producers Exxon Mobil and Hess plan to export the first-ever shipments of crude oil from Guyana between January and February, a milestone for Latin America’s newest oil producer, sources with knowledge of the plans said.

Elsewhere, Venezuela’s crude output in November jumped more than 20% from the prior month to the highest level since the United States tightened sanctions on state oil company PDVSA in August, two people with knowledge of PDVSA data said this week.

Investors are also eyeing other major events this week including the British election on Thursday and U.S. and European Central Bank meetings for further trading cues.

Oil prices recoil as specter of trade war, weaker demand haunts market

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Reuters
KEY POINTS
  • Brent futures were down 14 cents, or 0.2%, at $64.11 per barrel by 0450 GMT.
  • West Texas Intermediate oil futures were 13 cents, or 0.2%, lower to $58.89 a barrel.
  • The benchmarks fell 0.2% and 0.3% respectively on Monday.
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Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
Benjamin Lowy | Getty Images

Oil prices slipped on Tuesday for a second straight session as the cons of a slowing global demand outlook outweighed the pros of OPEC’s agreement with associated producers at the end of last week to deepen crude output cuts in early 2020.

Brent futures were down 14 cents, or 0.2%, at $64.11 per barrel by 0450 GMT. West Texas Intermediate oil futures were 13 cents, or 0.2%, lower to $58.89 a barrel. The benchmarks fell 0.2% and 0.3% respectively on Monday.

“The euphoria (on output cuts) was short lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict,” said ANZ Bank in a note on Tuesday.

Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.

That weakness came amid fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast: Washington’s next round of tariffs against some $156 billion Chinese goods are scheduled to take effect on Dec. 15.

U.S. President Donald Trump does not want to implement the next round of tariffs, U.S. Agriculture Secretary Sonny Perdue said on Monday — but he wants “movement” from China to avoid them.

“With the swathe of new tariffs due to kick in on 15 December, the market is watching negotiations closely,” said ANZ.

Analysts said that, though overshadowed for now, the move by “OPEC+” — the Organization of the Petroleum Exporting Countries (OPEC) and associated producers like Russia — to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd would remain a mid-term support factor.

But rising non-OPEC production threatens to counteract efforts to limit global crude supplies.

“Despite the voluntary restraint from OPEC, world oil markets remain well supplied … with non-OPEC output expected to rise by well over 2 million bpd next year, with big increases in the U.S., Brazil, and Norway,” said Henning Gloystein, director of global energy and natural resources at Eurasia Group in a note.

U.S. crude oil output recently hit a record of 13 million bpd and is expected to rise further in 2020.

“Going forward, oil prices are likely to be more data-driven, and move in tandem with demand forecasts,” said Margaret Yang, market analyst at CMC Markets.

Oil prices slip as weak China exports highlights trade war impact

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Reuters
KEY POINTS
  • Brent futures were down 21 cents, or 0.3%, at $64.18 per barrel by 0220 GMT, after gaining about 3% last week on the news that OPEC and its allies would deepen output cuts.
  • West Texas Intermediate oil futures were down 28 cents, or 0.47% to $58.92 a barrel, having risen about 7% last week on the prospects for lower production from ‘OPEC+’, which is made up of the Organization of the Petroleum Exporting Countries (OPEC) and associated producers including Russia.
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A man working in a filling station of Sinopec, China Petroleum and Chemical Corporation, in Shanghai, China, on March 22, 2018.
Johannes EIsele | AFP | Getty Images

Oil prices fell on Monday after data showing China’s overall exports of goods and services shrank for a fourth straight month, sending shivers through a market already concerned about damage being down to global demand by the U.S.China trade war.

Brent futures were down 21 cents, or 0.3%, at $64.18 per barrel by 0220 GMT, after gaining about 3% last week on the news that OPEC and its allies would deepen output cuts.

West Texas Intermediate oil futures were down 28 cents, or 0.47% to $58.92 a barrel, having risen about 7% last week on the prospects for lower production from ‘OPEC+’, which is made up of the Organization of the Petroleum Exporting Countries (OPEC) and associated producers including Russia.

Monday’s sudden chill came after customs data released on Sunday showed exports from the world’s second-biggest economy in November fell 1.1% from a year earlier — a sharp reversal from expectations for a 1% rise in a Reuters poll.

The weak start to the week came despite data showing China’s crude imports jumped to a record, revealing just how deep jitters are embedded in the market over the U.S.-China trade row that has stymied global growth and oil demand.

The sagging export data is “a casualty again of the protracted trade war,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Washington and Beijing have been trying to agree a trade deal that will end tit-for-tat tariffs, but talks have dragged on for months as they wrangle over key details.

Monday’s declines also went against signs on Friday that China was easing its stance on resolving its trade dispute with the United States, confirming on Friday that it was waiving import tariffs for some soybean and pork shipments.

The price drops also put an end to a strong run in previous sessions fueled by hopes for the OPEC+ production curb deal.

On Friday, those producers agreed to deepen their output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd, representing about 1.7% of global production.

“What made the announcement constructive … was the fact that Saudi Arabia said it will produce around 400,000 bpd below its new quota level,” ING Economics said in a note.

“This would effectively take OPEC+ cuts to 2.1 million bpd,” ING said.

Still, U.S. production has surged since the OPEC+ cuts were first introduced in 2017 in an attempt to drain a supply glut that had long weighed on prices.

American output has risen even as the drill count has fallen, reflecting more efficient well extraction.

Energy services firm Baker Hughes said in its closely watched weekly drilling report on Friday that the U.S. drill count fell in the week to Dec. 6 — a seventh week of decline.

Drilling companies cut five oil rigs, leaving a total of 661, the lowest since April 2017.

Oil slips as OPEC+ prepares to discuss deeper output cuts

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Reuters
KEY POINTS
  • Brent crude futures dipped 10 cents, or 0.2%, to $62.90 a barrel by 0547 GMT. Brent surged 3.6% on Wednesday.
  • West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.4%, to $58.21 a barrel. They settled up 4.2% on Wednesday.
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A oil rigger at the Schlumberger field prepares pipes in Midland, Texas on December 16, 2008.
Kirk McKoy | Los Angeles Times | Getty Images

Oil prices fell in muted trading ahead of OPEC talks in Vienna later on Thursday, trimming some of the sharp gains made the previous session on both the possibility of producers agreeing further output cuts and a sharp drop in U.S. crude inventories.

Brent crude futures dipped 10 cents, or 0.2%, to $62.90 a barrel by 0547 GMT. Brent surged 3.6% on Wednesday.

West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.4%, to $58.21 a barrel. They settled up 4.2% on Wednesday.

Prices are now back roughly to the levels of a week ago, before they plunged on a lack of progress on resolving a 17-month-old China-U.S. trade war that has hit global growth and demand for oil.

U.S. President Donald Trump on Wednesday described trade talks with China as going “very well,” a day after saying it could take until after next year’s presidential election to complete an agreement.

Investor attention has switched to meetings of the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, and the possibility of more production cuts.

The so-called OPEC+ group has been curbing output since 2017 to counter surging production from the United States, which is now the world’s biggest oil producer. OPEC+ has been withholding about 1.2 million barrels per day of production.

OPEC is aiming to push for deeper reductions in output but needs the agreement of Russia and other oil producers to avoid a supply glut next year, after demand growth slowed in 2019, while many analysts are skeptical of further cuts.

“Saudi Arabia’s concerns about its loss of market share and little appetite for increased cuts in Russia, will win the day,” said Franziska Palmas, assistant economist at Capital Economics. “Accordingly, we expect OPEC+ to only roll over its current production quota at this week’s meeting.”

OPEC members will meet among themselves on Thursday and be joined on Friday by Russia and the other producers.

Oil prices surged on Wednesday after U.S. crude inventories fell by much more than expected, according to official figures.

Crude stockpiles fell by 4.9 million barrels last week, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll of a 1.9 million-barrel decline.

Still, gasoline and distillate stocks surged by a similar amount as crude’s decline, with refinery runs increasing ahead of winter stockpiling.

Gasoline stocks were up by 3.4 million barrel, double expectations in the Reuters poll. Distillate inventories jumped by nearly three times expectations, gaining 3.1 million barrels.