Brent crude oil rises for a sixth day as supplies tighten amid strong demand

CNBC

  • Oil markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), but the potential of renewed U.S. sanctions against Iran is also pushing prices higher.

Brent crude oil rose for sixth day on Tuesday, passing $75 a barrel, on expectations that supplies will tighten because fuel is rising at the same time the United States may impose sanctions against Iran and OPEC-led output cuts remain in place.

Brent crude oil futures climbed to as high as $75.20 a barrel in early trading on Tuesday, the highest since Nov. 27, 2014. Brent was still at $75 a barrel at 0311 GMT up 29 cents, or 0.4 percent, from its last close.

Brent’s six-day rising streak is the most since a similar string of gains in December and it is up by more than 20 percent from its 2018 low in February.

Oil Russia

Sergei Karpukhin | Reuters

U.S. West Texas Intermediate (WTI) crude futures were at $68.98 a barrel, up 34 cents, or 0.5 percent from their last settlement. On Thursday, WTI rose to as high as $69.56, the most since Nov. 28, 2014.

Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.

The potential of renewed U.S. sanctions against Iran is also pushing prices higher.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel.”

The United States has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.

“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.

OPEC’s efforts to tighten markets are being led by top exporter Saudi Arabia, where state-controlled oil firm Saudi Aramco is pushing for higher prices ahead of a partial listing planned for later this year or 2019.

“Oil strength is coming from Saudi Arabia’s recent commitment to get oil back up to between $70 to $80 per barrel as well as inventory levels that are back in the normal range,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.

One of the few factors that has limited oil prices from surging even more is U.S. production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.

As a result of its rising output, U.S. crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.

Oil steady as US drilling tempers bullish sentiment

CNBC

  • Oil prices were steady on Monday.
  • A rising U.S. rig count pointed to further increases in the country’s output.
  • Prices are also being supported by the supply cuts led by OPEC that were introduced in 2017.

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Oil prices were steady on Monday as a rising U.S. rig count pointed to further increases in American output, marking one of the few factors tamping back crude in an otherwise bullish environment.

Brent crude oil futures were at $74.07 per barrel at 0354 GMT, virtually unchanged from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 3 cents at $68.37 a barrel.

U.S. drillers added five oil rigs drilling for new production in the weekended April 20, bringing the total count to 820, highest since March 2015, according to General Electric’s Baker Hughes energy services firm.

The rising rig numbers point to further increases in U.S. crude production, which is already up a quarter since mid-2016 to a record 10.54 million barrels per day (bpd).

Only Russia produces more at almost 11 million bpd.

Despite the dips in crude oil on Monday, the overall market remains well supported, especially by strong demand in Asia, and Brent prices are up by 20 percent from their 2018 lows in February.

Prices are also being supported by the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) that were introduced in 2017 to prop up the market.

“Added price pressure comes from U.S. sanctions against the key oil exporting nations of Venezuela, Russia and Iran,” said J.P. Morgan Asset Management Global Market Strategist Kerry Craig. He was referring to action the U.S. government has taken on Russian companies and individuals, as well as on potential new measures against struggling Venezuela and especially OPEC-member Iran.

“Stay long oil,” U.S. bank J.P. Morgan said in a separate note to clients. The United States has until May 12 to decide whether it will leave the Iran nuclear deal and instead impose new sanctions against Tehran, including potentially on its oil exports, which would further tighten global supplies.

Trump shouldn't call on OPEC for lower oil

Trump shouldn’t call on OPEC for lower oil  

The U.S. trade action against Russia and, potentially, against Iran has resulted in a slump in Russia’s ruble and Iran’s rial.

This means costs for any imported goods become more expensive for its citizens or companies, but it has also pushed up the value of Russia’s and Iran’s oil sales as all of their production costs are in the local currencies, while foreign sales are virtually all made in the U.S. dollar.

The generally elevated oil prices have also sparked a spat between U.S. President Donald Trump and producer cartel OPEC.

Trump on Friday accused OPEC of “artificially” boosting oil prices, threatening on Twitter that this “will not be accepted”, drawing rebukes from several of the world’s top oil exporters within OPEC.

Can $80 Oil Be Justified?

OIL PRICE

Oil Rig

Oil prices could reach $80 a barrel in April, although such a price would not be justified by market fundamentals, Russia’s Energy Minister Alexander Novak said on Friday.

Asked whether $80 oil is a fair price for oil, Novak told reporters at the end of an OPEC/non-OPEC ministerial meeting in Saudi Arabia that he couldn’t rule out anything, and geopolitical factors could push prices up. But $80 oil, according to Novak, is not the price that fundamentals are currently supporting, Russian news agency RIA Novosti quoted the minister as saying.

Novak declined to pinpoint a specific price of oil that would be justified by fundamentals, saying that oil prices are volatile right now. When oil prices are more stable, then we would be able to say what the fair price of oil is, the minister said.

Oil prices fell on Friday morning after U.S. President Donald Trump criticized OPEC in a tweet, saying that “Oil prices are artificially Very High! No good and will not be accepted!”

Asked by reporters if he thinks that the price of oil is artificially high, Novak said “No”.

Reports over the past week have emerged that OPEC’s biggest exporter and de facto leader Saudi Arabia could be aiming for oil prices at $80 and even $100 a barrel to balance its budget and boost the valuation of its oil giant Aramco.

Related: How High Can Trump Push Oil Prices?

Some analysts do expect oil to reach $80 in the coming months.

Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch, told Bloomberg Daybreak: Americas that he sees oil hitting that level in this quarter, due to some bottlenecks emerging in the Permian that could slow down the growth pace.

Goldman Sachs, for its part, sees oil prices at $80 by the fourth quarter of this year due to expectations that global oil demand growth will stay high this year, and that China’s demand growth may be even higher than currently estimated.

By Tsvetana Paraskova for Oilprice.com

Oil remains close to late-2014 highs as ongoing supply cuts reduce inventories

CNBC

  • Oil prices were firm on Friday near three-year highs reached earlier this week.
  • OPEC has been withholding production since 2017 to draw down a supply overhang.
  • Crude prices have also been supported by an expectation that the U.S. will re-introduce sanctions on Iran.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices on Friday stayed near three-year highs reached earlier this week, with ongoing OPEC-led supply cuts and strong demand gradually drawing down excess supplies.

Brent crude oil futures were at $73.74 per barrel at 0657 GMT, down 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 13 cents at $68.16 a barrel.

Both Brent and WTI hit their highest levels since November, 2014 on Thursday, at $74.75 and $69.56 per barrel respectively. WTI is set for its second weekly gain, climbing more than 1 percent this week, while Brent is also poised to rise for a second week, adding around 1.5 percent.

Traders said there had been some profit-taking on Friday following Thursday’s multi-year highs.

There was also some caution after Russia’s energy minister Alexander Novak was reported saying that a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia may this year ease output restrictions.

Producer cartel OPEC and its allies have been withholding production since 2017, helping push up prices. The deal to cut is currently scheduled to expire at the end of 2018.

After a tepid start in 2017, the supply restraint had by this year started tightening markets.
“Commercial inventories in the OECD are now essentially at their five-year average, and drawdowns likely accelerate as refineries emerge from maintenance ahead of peak seasonal demand,” U.S. investment bank Jefferies said on Friday.

Saudi Arabia is 'going to the whip' to drive oil prices higher, says pro

Saudi Arabia is ‘going to the whip’ to drive oil prices higher, says pro  

“OECD commercial inventories could fall back to … a level not seen since the oil price collapse that began in 3Q14. On a day of forward demand basis, we believe cover could drop below 57 days later this year, a level last seen in 2011,” it added.

The tightness is also a result of strong oil demand.

“Global oil demand data so far in 2018 has come in line with our optimistic expectations, with 1Q18 likely to post the strongest year-on-year growth since 4Q10 at 2.55 million barrels per day,” U.S. bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC’s supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

“The first key geopolitical issue is the expiration of the current U.S. waiver of key sanctions against Iran,” said Standard Chartered Bank in a note this week, referring to a deadline on May 12 when U.S. President Donald Trump will decide whether or not to re-impose sanctions.

One factor that could start weighing on prices is rising U.S. production, which has jumped by a quarter since the middle of 2016 to 10.54 million barrels per day (bpd), making the United States the world’s second-biggest producer of crude oil behind only Russia, which pumps almost 11 million bpd.

Oil prices rise amid risk of supply disruptions

CNBC

  • Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply.
  • Traders said those risks included potentially spreading conflict in the Middle East and renewed U.S. sanctions against Iran.

Oil fracking California

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Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply, especially in the Middle East.

Brent crude oil futures were at $71.69 per barrel at 0326 GMT, up 27 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $66.54 a barrel.

Traders said oil markets were receiving general support due to a sense that there were high risks of supply disruptions, including a potentially spreading conflict in the Middle East, renewed U.S. sanctions against Iran and falling output as a result of political and economic crisis in Venezuela.

“With so many potential supply disruptors in play and few signs that the current market upheaval will end any time soon, traders continue to pay the geopolitical risk premium,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

“Oil prices should remain bid … at least through the Iran nuclear deal deadline (May 12) if not for the remainder of 2018,” he added.

Oil markets have generally been well supported this year, with Brent up by around 16 percent from its 2018-low in February, due to healthy demand which comes as the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) leads supply cuts aimed at tightening the market and propping up prices.

US output soars

Beyond OPEC’s production restraint and concerns about supply disruptions, the main market driver in oil has been the United States, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day (bpd), largely thanks to a booming shale industry.

Only Russia pumps out more oil currently at almost 11 million bpd.

“U.S. shale producers have been quietly capitalizing on higher oil prices with increasing rig counts seen. A staggering amount of 73 rotary rigs have been placed since January 2018,” said Benjamin Lu of Phillip Futures in a note on Tuesday.

“As such, we expect a softening in crude oil prices as markets adjust from a bullish streak,” he added.

The American Petroleum Institute (API) is due to publish weekly U.S. fuel inventory data later on Tuesday while official government data, including on production, is due from the U.S. Energy Information Administration (EIA) on Wednesday.

Oil logs strongest weekly performance in over 8 months

MarketWatch

Monthly IEA report, Syria tensions lift oil

Reuters

By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Crude-oil prices rose for a fifth straight session Friday, with U.S. benchmark crude tallying a gain of nearly 9% for the week, driven by fears of a U.S.-led military conflict in Syria.

A report from the International Energy Agency on Friday also indicated that OPEC soon will have succeeded in reaching its target for reducing the global supply glut.

May West Texas Intermediate crude CLK8, +0.48%  tacked on 32 cents, or 0.5%, to settle at $67.39 a barrel on the New York Mercantile Exchange. For the week, the U.S. oil benchmark rallied by roughly 8.6%, which was the strongest weekly percentage performance since late July of last year.

June Brent LCOM8, +0.83% added 56 cents, or 0.8%, to $72.58 a barrel on ICE Futures Europe. For the week, in the international benchmark was up about 8.2%.

On Friday, the IEA indicated that global oil stockpiles are dwindling and approaching the five-year average the Organization of the Petroleum Exporting Countries is targeting.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its report.

The Vienna agreement refers to the group of OPEC and non-OPEC countries that in 2016 agreed to cut output in an effort to reduce a global supply glut that had dragged oil prices substantially lower. The IEA report echoes the monthly data from OPEC earlier this week, which showed the group’s output declined by 201,000 in March and that the supply surplus is evaporating.

The IEA also noted that the continuing U.S.-China trade spat could dent oil demand.

Longer term, “we are bullish on oil prices as continued global economic growth drives demand higher by approximately 1.5% per year,” said Jay Hatfield, chief executive officer and founder of InfraCap. Global supply also “remains constrained by declines in Venezuela production, flat to declining production in offshore areas such as the North Sea, offset by steady growth in U.S. production of approximately 1 million barrels per day.”

Hatfield expects WTI to trade in the $60-70 range this year and $70-80 in 2019, “with more risk to the upside.”

Read: Here’s why Credit Suisse just boosted its oil price forecast by 18%

In the U.S., Baker Hughes BHGE, +1.37%  on Friday reported that the number of active domestic oil rigs edged up by 7 this week. The figure, which offers a peek at U.S. oil activity, was up a second straight week.

Still, market participants said crude futures have come under pressure amid fears that Russia may retaliate against the U.S. by imposing sanctions in response to sanctions levied against Moscow last week in response to what the U.S. said was attempts to subvert Western democracies, and malicious cyber activities.

“This news offset good news about the ratcheted down of trade tensions with China and the possibility the U.S. could be re-entering the [Trans-Pacific Partnership],” said Phil Flynn, senior market analyst at Price Futures Group, in a note.

The fear is that sanctions from Russia could hurt demand and push prices lower, he explained.

More broadly, the stellar weekly performances for both WTI and Brent this week come as geopolitical tensions have returned to the fore after a suspected chemical-weapons attack in Syria that killed civilians over the weekend. That matter is also complicated by Syria’s friendly ties with Russia, Iran and Turkey.

U.S. President Donald Trump on Wednesday warned Russia that he was ready to launch an imminent military attack on Syria, but toned down his rhetoric on Thursday.

Among energy products, gasoline RBK8, +0.34%  settled 0.5% higher at $2.065 a gallon, for a 5.7% gain on the week. May heating oil HOK8, +0.87% added 0.8% to $2.10 a gallon—up about 7.3% for the week.

May natural gas NGK18, +1.86%  rose 1.8% to $2.735 per million British thermal units, for a weekly rise of 1.3%.

Oil prices firm, but trade dispute and Syria keep market on edge

CNBC

  • Oil markets stabilized after slumping around 2 percent last Friday.
  • Markets eyed the situation in Syria after reports – denied by the Pentagon – that U.S. forces had struck a major air base there.
  • Oil prices fell about 2 percent on Friday after U.S. President Donald Trump threatened new tariffs on China.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil markets stabilized on Monday after slumping around 2 percent last Friday on concerns over an intensifying trade dispute between the United States and China, as well as increased U.S. drilling activity.

Markets on Monday were also eyeing the situation in Syria after reports – denied by the Pentagon – that U.S. forces had struck a major air base there.

U.S. WTI crude futures were at $62.34 a barrel at 0355 GMT, up 28 cents, or 0.45 percent, from their previous settlement.

Brent crude futures were at $67.43 per barrel, up 32 cents, or 0.5 percent.

Oil prices fell about 2 percent on Friday after U.S. President Donald Trump threatened new tariffs on China, reigniting fears of a trade war between the world’s two largest economies that could hurt global growth.

With Chinese markets closed last Thursday and Friday, Shanghai crude futures played catch-up on Monday, dropping 0.6 percent to around 400 yuan ($63.43) per barrel.

“Oil prices have been susceptible to the brewing trade tensions between China and the U.S….However, fundamental support levels have been demonstrated with OPEC’s suggestion on an production limit extension into 2019,” said Singapore-based Phillip Futures.

Oil prices have generally been supported by healthy demand as well as by supply restraint led by the Organization of the Petroleum Exporting Countries, which started in 2017 in order to rein in oversupply and prop up prices.

In physical oil markets, OPEC’s number two producer Iraq said on Monday that it is keeping prices for its crude supplies in May steady.

In the United States, drillers added 11 rigs looking for new production in the week to April 6, bringing the total count to 808, the highest level since March 2015, General Electric’s Baker Hughes energy services firm said on Friday.

As a result, U.S. exports have soared in recent months, “more than offsetting the Venezuelan supply disruption” as a result of the economic crisis in the South American OPEC-member, Innes said.