Oil prices fall as US inventory build-up heightens oversupply concerns

CNBC

Reuters
KEY POINTS
  • As of 0345 GMT, Brent crude was down by 47 cents, or 1.8%, at $25.88 a barrel.
  • U.S. West Texas Intermediate crude was up 12 cents, or 0.6%, at $20.6 a barrel, an uptick analysts said was driven by position building at the start of a the new quarter.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Global crude oil prices slid further on Wednesday, following their biggest-ever quarterly and monthly losses, as a bigger-than-expected rise in U.S. inventories and a widening rift within OPEC heightened oversupply fears.

Oil prices are near their lowest since 2002 amid the global coronavirus crisis that has brought a worldwide economic slowdown and slashed oil demand.

Crude futures ended the quarter down nearly 70% after record losses in March.

As of 0345 GMT, Brent crude was down by 47 cents, or 1.8%, at $25.88 a barrel. U.S. West Texas Intermediate crude was up 12 cents, or 0.6%, at $20.6 a barrel, an uptick analysts said was driven by position building at the start of a the new quarter.

U.S. crude inventories rose by 10.5 million barrels last week, far exceeding forecasts for a 4 million barrel build-up, data from industry group the American Petroleum Institute showed.

“The market sentiment remains bleak as there is no clarity on how long the pandemic will continue,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Nearly 800,000 people have been infected across the world and more than 38,800 have died, according to a Reuters tally.

The bearish mood in the market wasn’t improved by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other members of OPEC were unable to come to an agreement on Tuesday to meet in April to discuss sliding prices.

“It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses,” BNP Paribas analyst Harry Tchilinguirian said in a report issued on Tuesday.

Adding to the downward pressure, sources told Reuters that top U.S. officials have for now put aside a proposal for an alliance with Saudi Arabia to manage the global oil market.

The Trump administration plans to lease out space for energy companies to store oil in the nation’s Strategic Petroleum Reserve, after a previous effort to buy millions of barrels for the emergency stockpile was cancelled over a lack of funding.

A Reuters survey of 40 analysts forecast Brent would average $38.76 a barrel in 2020, 36% lower than the $60.63 forecast in a February survey.

Oil rebounds from 18-year lows after US, Russia agree to talks

CNBC

Reuters
KEY POINTS
  • Brent crude was up by 43 cents, or 1.9%, at $23.19 a barrel by 0406 GMT, after closing on Monday at $22.76, its lowest finish since November 2002.
  • U.S. crude was up by $1.16, or 5.8%, at $21.26 a barrel, after settling in the earlier session at $20.09, lowest since February 2002.
GP: Oil Pumping Jacks
Oil pumping jacks, also known as “nodding donkeys”, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil recovered ground on Tuesday after U.S. President Donald Trump and Russian President Vladimir Putin agreed to talks to stabilize energy markets, with benchmarks climbing off 18-year lows hit as the coronavirus outbreak cut fuel demand worldwide.

Brent crude was up by 43 cents, or 1.9%, at $23.19 a barrel by 0406 GMT, after closing on Monday at $22.76, its lowest finish since November 2002.

U.S. crude was up by $1.16, or 5.8%, at $21.26 a barrel, after settling in the earlier session at $20.09, lowest since February 2002.

Oil markets have faced a double whammy from the coronavirus outbreak and a price war between Saudi Arabia and Russia after OPEC and other producers failed to agree on deeper cuts to support oil prices in early March.

Trump and Putin agreed during a phone call to have their top energy officials discuss stabilizing oil markets, the Kremlin said on Monday.

“Oil prices are clawing back from a near 18-year low on hopes that oversupply concerns may finally see some relief,” said Edward Moya, senior market analyst at broker OANDA.

“Much of the focus has fallen on a key call between the Presidents of the United States and Russia.”

With a plunge in prices that has knocked around 60% off oil this year, a commissioner with the Texas state energy regulator renewed his call for restrictions on crude production because of the national supply glut.

In a sign of how well the market is supplied, the front-month Brent futures contract for May, is currently at a discount of $13.95 per barrel to the November contract, the widest contango spread ever seen.

A contango market implies traders expect oil to be higher in the future, prompting them to store oil for later sales.

Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), plans to boost its oil exports to 10.6 million barrels per day (bpd) from May on lower domestic consumption, a Saudi energy ministry official said.

Global oil refiners, meanwhile, have cut their throughput because of the slump in demand for transportation fuel, with European refineries slashing output by at least 1.3 million bpd, sources told Reuters.

UBS estimated global oil demand to fall by 1.2 million bpd, or 1.2%, over the whole of 2020, weighed down by the coronavirus pandemic, the Swiss bank said in a note.

Others, including the chief economist for global commodities trader Trafigura, have said that oil demand could fall as much as 30% from the end of last year over coming weeks.

Oil prices mixed as demand shrinks, but stimulus hopes support

CNBC

Reuters
KEY POINTS
  • West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT.
  • Brent crude futures rose 12 cents, or 0.4%, to $27.51.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were mixed on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.

West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT, while Brent crude futures rose 12 cents, or 0.4%, to $27.51.

“With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note.

The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

“Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said.

U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.

Oil extends gains as optimism over US stimulus lifts global markets

CNBC

Reuters
KEY POINTS
  • U.S. crude touched a high of $25.24 a barrel early in the session and was at $24.82 a barrel, up 81 cents, or 3.4%, by 0412 GMT.
  • Brent crude was trading up 75 cents, or 2.8%, at $27.90 a barrel after rising to a high of $28.29.
GP: Oil Pumping Jacks
Oil pumping jacks, also known as “nodding donkeys”, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil prices extended gains for a third session on Wednesday, rising alongside broader financial markets on hopes Washington will soon approve a massive aid package to stem the economic impact of the coronavirus pandemic.

U.S. crude touched a high of $25.24 a barrel early in the session and was at $24.82 a barrel, up 81 cents, or 3.4%, by 0412 GMT.

Brent crude was trading up 75 cents, or 2.8%, at $27.90 a barrel after rising to a high of $28.29.

The U.S. Congress may vote on Wednesday on the $2 trillion stimulus after Republicans and Democrats said they were close to a deal, with optimism over the package fueling a surge in stock markets.

Still, demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to curb the spread of the coronavirus, putting a lid on oil price gains.

“It will be difficult to lift demand if lockdowns are announced in many countries and airline services remain suspended,” ANZ analysts said in a note.

The market is also facing the threat of increased supplies after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, a grouping known as OPEC+, failed to extend an agreement to cut production and support prices beyond end-March.

Oil prices have fallen about 45% so far this month.

“A pare back in production from the OPEC+ and a stabilisation in the coronavirus episode are both needed to lift oil prices back to its pre-collapse prices,” analysts at OCBC Bank said in a note.

In the United States, crude inventories fell by 1.2 million barrels in the week to March 20 to 451.4 million barrels, compared with analysts’ expectations for a build of 2.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.

Gasoline and distillate stocks also fell last week, API said.

Analysts said in a Reuters poll on Tuesday that U.S. crude oil stockpiles likely built for a ninth successive week, while inventories of refined products were expected to have dropped, with gasoline set to decline for the eighth straight week.

The weekly report from the Energy Information Administration (EIA) is due at 10:30 a.m. on Wednesday.

Oil extends gains after Trump hints at intervening in Saudi-Russia price war

CNBC

Reuters
KEY POINTS
  • U.S. crude futures for April rose 92 cents, or 3.7% to $26.14 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.
  • Brent crude futures climbed 57 cents, or 2%, to $29.04 per barrel. Brent rose 14.4% on Thursday in its biggest one-day gain since September.
GP: US Pumpjack at Dusk in the Permian Basin
Silhouette of Permian Basin pumpjacks taken at dusk, north of Midland, Texas, U.S. in late 2019.
Richard Eden | via Getty Images

U.S. crude oil prices rose over $1 on Friday, extending steep gains from the previous session, after U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an “appropriate time”.

Prices were also supported by United States’ plans to buy oil for its emergency stockpile, while regulators in the country’s largest oil-producing state Texas were reportedly considering curtailing production.

“Such actions, if implemented, would reduce global and domestic supplies and help support prices in the near-term,” Goldman Sachs said in a note on Friday.

“While this support could prove lasting in 2H20, the accompanying supply cuts would however remain much too small to offset the current 8 million barrels per day hit on demand from the coronavirus…”

The more active West Texas Intermediate (WTI) crude futures contract for May was up $1.01, or 3.9% at $26.92 a barrel by 0352 GMT.

U.S. crude futures for April rose 92 cents, or 3.7% to $26.14 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.

Brent crude futures climbed 57 cents, or 2%, to $29.04 per barrel. Brent rose 14.4% on Thursday in its biggest one-day gain since September.

U.S. crude and Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down, which led Saudi Arabia to ramp up supply.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.

“A fair bit of short covering ensued after President Trump suggested he may tackle the oil crisis by brokering a deal between Moscow and Riyadh,” Stephen Innes, chief market strategist at AxiCorp, said in a note.

U.S. crude prices were also supported by the country’s plans to buy crude for stockpiling after the U.S. Department of Energy said it would buy up to 30 million barrels of crude oil for the Strategic Petroleum Reserve by the end of June.

“Buying oil for the strategic reserve is a very constructive measure to help some U.S. producers avoid collapse amid the international price war,” said Per Magnus Nysveen, head of analysis at Oslo-based energy research firm Rystad Energy.