Oil prices edge higher as OPEC hints at deeper output cuts

SINGAPORE (Reuters) – Oil prices rose on Wednesday, tracking gains in equities, as investors pinned hopes on a potential Brexit deal between Britain and the European Union and on signals from OPEC and its allies that further supply curbs could be possible.

But gains were limited due to lingering concerns of a global economic slowdown.

Global benchmark Brent crude oil futures LCOc1 had risen 25 cents to $58.99 by 0621 GMT, up about 0.4% from the previous day’s close. U.S. West Texas Intermediate (WTI) crude CLc1 had gained 23 cents or 0.4% to $53.04 a barrel.

“Oil is starting to see some bullish positions added on the easing of two big tail risks for global demand, the U.S.-China trade war and Brexit,” said Edward Moya, a senior market analyst at OANDA in New York.

“While a broader trade deal seems unlikely in the immediate future, the risks for the U.S.-China trade war have been fading.”

Last-ditch talks between Britain and the European Union to get a Brexit deal ahead of a summit of the bloc’s leaders this week ran past midnight to Wednesday, but it was still unclear if Britain could avoid postponing its departure, due on Oct. 31.

Analysts have said any agreement that avoids a “hard” or no-deal Brexit should boost economic growth and in turn oil demand and prices.

Providing more support, OPEC Secretary-General Mohammad Barkindo said the Organization of the Petroleum Exporting Countries “will do whatever (is) in its power” along with its allied producers to sustain oil market stability beyond 2020.

OPEC, Russia and other producers have cut oil output by 1.2 million barrels per day to support the market.

Yet an expected rise in U.S. crude inventories this week kept prices under pressure.

U.S. crude stocks probably grew for the fifth straight week, a preliminary Reuters poll showed.

U.S. oil inventory reports are due out from industry group the American Petroleum Institute on Wednesday and the U.S. Energy Information Administration on Thursday. The reports have been delayed one day because of a U.S. government holiday.

“Should EIA inventories illustrate for a fifth consecutive week build, we expect for strong selling pressure to afflict oil prices on an intraday basis,” Benjamin Lu from Phillip Futures said in a note.

Concerns of a global economic slowdown due to the protracted trade war between the United States and China and swelling U.S. inventories also pressured prices.

The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund warned on Tuesday.

Reporting by Jessica Jaganathan; Editing by Clarence Fernandez & Simon Cameron-Moore

Oil prices fall as hopes for US-China trade progress wilt

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Reuters
KEY POINTS
  • Global benchmark Brent crude futures fell 11 cents, or 0.2%, to $58.21 a barrel by 0354 GMT.
  • U.S. West Texas Intermediate (WTI) futures were down 11 cents, or 0.2%, at $52.48 per barrel.
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Journalists gather next to a damaged installation in Saudi Arabia’s Abqaiq oil processing plant on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices fell on Thursday on concerns of lower fuel demand as talks this week between the United States and China, the world’s two largest oil users, are not expected to help end the trade war between them, adding to anxieties about the global economy.

China, the world’s biggest oil importer, has lowered their expectations for talks on Thursday and Friday to end the 15-month-old trade dispute with the United States. U.S. President Donald Trump is set to raise the tariff rate on about $250 billion of Chinese goods to 30% from 25% on Oct. 15 if some signs of progress are not seen.

The trade dispute between the world’s two largest economies has disrupted global supply chains and slowed the growth of both countries, limiting the growth of their fuel consumption.

Global benchmark Brent crude futures fell 11 cents, or 0.2%, to $58.21 a barrel by 0354 GMT, while U.S. West Texas Intermediate (WTI) futures were down 11 cents, or 0.2%, at $52.48 per barrel.

“Should U.S.-China trade negotiations take a turn for the worst, market pessimism will impose sharp negative pressures on oil prices, said Benjamin Lu, commodities analyst at Phillip Futures in Singapore.

Prices were also weighed down by a report of rising stockpiles in the United States, which is also currently the world’s biggest oil producer.

U.S. crude stocks rose 2.9 million barrels in the week to Oct. 4, the Energy Information Administration (EIA) said on Wednesday, more than double analysts’ expectations of an increase of 1.4 million barrels.

Additionally, the Organization of the Petroleum Exporting Countries (OPEC) quietly adjusted its production pact to allow Nigeria to raise its output, adding more supply.

OPEC granted Nigeria raised the quota to 1.774 million barrels per day (bpd) from 1.685 million bpd, three OPEC delegates with knowledge of the matter said.

OPEC member Venezuela will also increase its exports despite U.S. economic sanctions that have curtailed shipments from the country.

Indian refiner Reliance Industries plans to start loading Venezuelan crude after a four month pause, in a further sign of expanding crude supply to the market.

Oil prices dip for 3rd day as US-China trade doubts grow

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KEY POINTS
  • Brent crude futures fell 24 cents, or 0.4%, to $58.00 a barrel by 0442 GMT.
  • U.S. West Texas Intermediate crude was at $52.39, down 24 cents or 0.5%.
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A destroyed installation in Saudi Arabia’s Khurais oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices slipped for a third consecutive session on Wednesday as tensions escalated between the United States and China prior to this week’s trade talks, raising uncertainties for global economic growth and oil demand.

U.S. industry data showing a bigger-than-expected rise in stockpiles at the world’s top oil producer also depressed prices. Brent crude futures fell 24 cents, or 0.4%, to $58.00 a barrel by 0442 GMT, while U.S. West Texas Intermediate crude was at $52.39, down 24 cents or 0.5%.

Negotiators from the world’s top two economies will meet in Washington on Thursday and Friday in the latest effort to hammer out a deal aimed at ending a long-running trade dispute that has slowed global economic growth.

But tensions between the pair rose this week after the United States imposed visa restrictions on Chinese officials for the detention or abuse of Muslim minorities, while a row escalated over comments by a leading U.S. National Basketball Association official in support of protests in Hong Kong.

The issues have set markets on a risk-aversion course, said Howie Lee, an economist with Singapore’s OCBC bank, even though the global oil market remains in a supply deficit that should in theory support prices at above $60 a barrel.

“The market is just over-bearish at the moment, too focused on the demand side of the equation,” Lee said.

The concerns have overshadowed the threat of OPEC-member Ecuador losing a third of its oil supply due to anti-government protests that have seriously affected oil output.

Ecuadorean state-run firm Petroamazonas estimates it could lose some 188,000 barrels per day (bpd), or more than a third of its crude production, due to unrest at its facilities.

An uprising in Iraq has also entered a second week, threatening output at the Organization of the Petroleum Exporting Countries’ second-largest producer.

“Political turmoil amongst OPEC members will provide only a temporary panacea for oil prices; the event risk of U.S.-China trade is much larger,” Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA, wrote in a note.

In the United States, meanwhile, crude stockpiles rose by 4.1 million barrels in the week ended Oct. 4 to 422 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected an increase of 1.4 million barrels, a Reuters poll showed.

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

The EIA said on Tuesday U.S. crude production is expected to rise by 1.27 million barrels per day (bpd) in 2019 to a record 12.26 million bpd, slightly above its previous forecast for a rise of 1.25 million bpd.

Output in 2020 is forecast to rise by 910,000 bpd to 13.17 million bpd, it said, below its previous estimate of a rise of 990,000 bpd to 13.23 million bpd.

Oil edges higher on supply worries ahead of US-China trade talks

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KEY POINTS
  • Brent crude rose 38 cents, or 0.7%, to $58.73 a barrel by 0344 GMT.
  • U.S. West Texas Intermediate (WTI) crude was at $53.08, up 33 cents, or 0.6%.
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Azeri oil workers operate a large field of drilling rigs on October 12, 2003 outside the capital city of Baku.
Oleg Nikishin | Getty Images

Oil prices rose on Tuesday, buoyed by overnight gains in industrial commodities, while unrest in oil-producing countries Iraq and Ecuador raised concerns of supply disruption, adding to support.

Brent crude rose 38 cents, or 0.7%, to $58.73 a barrel by 0344 GMT, while U.S. West Texas Intermediate (WTI) crude was at $53.08, up 33 cents, or 0.6%.

“Copper and aluminium traded very strongly in London and given the weakness we saw in manufacturing data last week, that suggests that there’s some correction going on in industrial commodities generally,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

“We’re at the lower end of the trading range, some of those moves have taken some traders by surprise. That means the risks have flipped to the upside at least in the short term.”

Investors are treading cautiously before U.S.-China trade discussions that will take place in Washington on Thursday, although expectations are low for a comprehensive deal that will end a trade war between the world’s top economies.

“While it’s virtually impossible to predict with any confidence how these trade talks will unfold, oil prices could be in for a sustained rally if the (U.S.) tariffs were to be put on hold indefinitely, which could see some of the braver at heart support dips,” Stephen Innes, Asia Pacific market strategist at AxiTrader, wrote in a note.

Protests in Iraq and Ecuador over poor economic conditions are threatening to disrupt output from the members of the Organization of the Petroleum Exporting Countries (OPEC).

The death toll has climbed after a week of unrest in Baghdad, capital of the second-largest OPEC producer.

In Ecuador, protests against austerity measures could reduce the Andean producer’s crude output by 59,450 barrels per day, the country’s energy ministry said late on Monday.

Ecuador, one of the smallest OPEC members, is pulling out of the bloc next year because of fiscal problems.

In the United States, crude inventories probably grew for a fourth straight week while distillates and gasoline stocks likely fell last week, a preliminary Reuters poll showed on Monday.

Separately, Russia, the world’s second-largest oil producer, has joined the ranks of swing producers as it could increase production fairly quickly by 0.3-0.5 million barrels per day, or 0.3-0.5% of global supply, if Saudi Arabia’s production problems were to last longer than expected, Russian Energy Minister Alexander Novak told Reuters.

Saudi Arabia, the world’s top oil exporter, has resumed production after an attack on its facilities on Sept. 14 cut its output by half.

Oil prices recover after output from US, Russia, OPEC drop

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KEY POINTS
  • December Brent crude futures rose 51 cents, or 0.86% to $59.76 a barrel by 0426 GMT.
  • U.S. West Texas Intermediate crude for November was up 52 cents, or 0.96%, at $54.59 a barrel.
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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 rebounded on Tuesday on reports that production at the world’s largest oil producers fell during the third quarter, although a resumption in Saudi supply and demand concerns continued to keep a lid on prices.

December Brent crude futures rose 51 cents, or 0.86% to $59.76 a barrel by 0426 GMT, while U.S. West Texas Intermediate crude for November was up 52 cents, or 0.96%, at $54.59 a barrel.

Front-month prices for both contracts posted their largest quarterly falls this year on Monday, hurt by a slowdown in global economic growth amid the U.S.-China trade war.

“Asia has seen some profit-taking from short-term money and other bargain hunters,” Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA in Singapore, said.

“Any rallies though are likely to be met with plenty of sellers as a slowing global economy and the recovery of Saudi production outweigh any Middle East risk factors for now.”

Oil prices are likely to remain steady, with Brent averaging $65.19 a barrel and WTI $57.96 in 2019, as flagging demand outweighs supply shocks, a Reuters survey showed.

Brent has averaged $64.72 a barrel so far this year, while WTI has averaged $58.13.

Saudi Aramco has restored full oil production and capacity to the levels they were at before attacks on its facilities on Sept. 14, the head of its trading arm said on Monday. Saudi Arabia pumped about 9.78 million barrels per day (bpd) in August.

Still, OPEC’s output fell to the lowest in eight years in September at 28.9 million bpd, down 750,000 bpd from August’s revised figure and the lowest monthly total since 2011, a separate Reuters survey found.

Output at the world’s two largest producers, the United States and Russia, also fell in July and September, respectively.

Russia’s output declined to 11.24 million bpd in Sept. 1-29, down from 11.29 million bpd in the previous month, sources said, although it is still above the quotas set in an output deal between Russia and OPEC.

U.S. crude oil output fell 276,000 bpd in July to 11.81 million bpd as federal offshore Gulf of Mexico production slid, according to a U.S. Energy Information Administration monthly report released on Monday.

U.S. production peaked at 12.12 million bpd in April.

Meanwhile, U.S. crude oil stockpiles likely rose 1.1 million barrels last week, while distillate stocks probably slipped, a preliminary Reuters poll showed on Monday.