Oil prices jump 2% in early trading as tensions in the Middle East mount, Brent crude tops $70

Oil prices jumped more than 2% during Sunday night trading — building on Friday’s gains — as tensions in the Middle East escalated over the weekend.

Following Thursday’s death of top Iranian commander Qasem Soleimani, on Sunday an Iranian state-run television broadcast said that the nation would no longer respect uranium enrichment restrictions set forth in 2015′s nuclear deal.

International benchmark Brent crude gained 2.3% to trade at $70.18 per barrel, while U.S. West Texas Intermediate climbed 2.1% to $64.38 per barrel.

On Friday Brent hit a more than three month high of $69.50, before settling at $68.60. Meantime WTI rose to a session high of $64.09 — its highest level since April — before pulling back to settle at $63.05, for a gain of 3.06%.

Iran has vowed to retaliate against the U.S., and the form that this retaliation takes will determine oil’s next move, according to Wall Street analysts. For instance, if the nation targets production in Saudi Arabia or Iraq — OPEC’s two largest producers — prices could move higher for longer.

On Friday, Citi global head of commodity research Ed Morse said that Brent prices will top $70 in short order, while Again Capital’s John Kilduff said that if Iraq production takes a hit “oil prices will spike higher.”

Iraq is OPEC’s second largest oil producer, pumping around 4.6 million barrels per day in December. On Sunday the Iraqi parliament passed a resolution calling for an expulsion of foreign troops, which raises question about the future of the allied mission that has successfully fought the “Islamic State,” or ISIS, in recent years.

VIDEO03:02
Oil prices jump after US airstrike killed Iran top commander—Four experts on how it affects energy

Helima Croft, RBC’s global head of commodity research, noted that in the past a geopolitical event of this nature would have caused a larger spike in oil, which demonstrates how resilient prices have become to geopolitical tensions.

This resiliency was on display in September after drone attacks on Saudi Arabia’s oil facilities in Abqaiq and Khurais took an estimated 5.7 million barrels of oil offline. While oil initially spiked 8% and climbed higher, prices ultimately drifted back down and a few weeks later were back at pre-attack levels after Saudi Aramco quickly restored production.

But this time around prices could stay elevated for longer, given tight supply and a historically weak part of the year for oil.

On Friday Eurasia Group raised its 2020 high-end base case oil target to $75 per barrel, based on “rising risk to oil infrastructure in the region.” If conflict breaks out, which the firm’s Middle East and North Africa head of research Ayham Kamel places at 30% likelihood, prices could climb as high as $95.

Citi said that other possible retaliations could be “attacks on pipeline oil flows or shipping through either the Strait of Hormuz or the Red Sea,” through which more than a fifth of the world’s oil supply flows.

Thursday’s airstrike comes following an especially strong fourth quarter for oil, which saw OPEC+ announce deeper-than-expected production cuts in December, and as easing trade tensions led to upbeat outlooks for demand.

WTI gained 10.68% in December — its best month since January 2019 — and 12.93% for the quarter. It’s 34.46% gain for the year was its best since 2016. Brent gained 5.7% in December and 8.59% for the quarter. It also had its best year since 2016, gaining 22.68%.

Carter Braxton Worth from Cornerstone Macro said WTI looks set to reach $72 per barrel, and that investors should “embrace” the pop. “It will be right to play energy stocks on the long side in the weeks/months again,” he said in a note to clients Sunday.

That said, analysts at Morgan Stanley said that “any further escalation could keep oil prices supported in the short term,” but that any gains could be short lived. The firm said it sees Brent closer to $60 rather than $70 for the year given “an oversupplied oil market in 2020 as a whole.”

– CNBC’s Michael BloomAmanda Macias and Spencer Kimball contributed to this report.

Oil hits three month highs as strong US consumer spending underpins growth hopes

CNBC

Reuters
KEY POINTS
  • Brent crude futures were up 6 cents, or 0.1%, at $67.98 a barrel at 0612 GMT.
  • The West Texas Intermediate contract was up 11 cents, or 0.2%, at $61.79 a barrel.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices rose on Friday, hitting three-month highs after data showed record online spending by U.S. consumers, stoking faith in the world’s no. 1 economy even before the hoped-for end to the trade war between Washington and Beijing.

Brent crude futures were up 6 cents, or 0.1%, at $67.98 a barrel at 0612 GMT, after rising to as high as $68.10, the highest since September. The West Texas Intermediate contract was up 11 cents, or 0.2%, at $61.79 a barrel.

A survey on Thursday showed that online holiday purchases by U.S. consumers reached a record, beating analysts’ expectations and sending U.S. stocks to fresh.

U.S. consumers are “showing few signs of tightening their purse strings, which is positive for oil also,” said Stephen Innes chief Asia market strategist at AxiTrader.

Oil prices have also been buoyed by robust hopes that the New Year will usher in an end to the long-running U.S.-China trade tariff war, a dispute that has overshadowed global economic growth prospects and left question marks over future demand for crude.

The lingering ripple effect of the trade row showed up again in data from Japan, the world’s third-biggest economy, on Friday showing that industrial output shrank for a second month in November.

Still, the price Brent has jumped more than a quarter in 2019, while WTI is up around 35%, boosted by moves by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to curb production. Earlier this month OPEC and its allies agreed to extend and deepen those cuts.

“The short-term momentum remains positive although I expect Asia to content itself with remaining on the sidelines today,” said Jeffrey Halley, senior market analyst, at OANDA.

Oil hovers near three-month highs on trade deal progress, set for third weekly rise

CNBC

Reuters
KEY POINTS
  • Brent futures were up 5 cents, or 0.08%, to 66.59 a barrel by 0242 GMT.
  • U.S. West Texas Intermediate was down 8 cents, or 0.13%, at $61.10 per barrel.
GP: Rosneft oil refinery Russia 190125
A general view of the Novokuibyshev Refinery owned by Rosneft oil company on March 15, 2012 in Novokuibyshevsk, Samara region, Russia.
Sasha Mordovets | Getty Images

Oil prices held steady near three-month highs on Friday, heading for a third consecutive weekly rise, on the back of easing China-U.S. trade tensions that have weighed on demand as well as the global economic growth outlook.

Brent futures were up 5 cents, or 0.08%, to 66.59 a barrel by 0242 GMT, while U.S. West Texas Intermediate was down 8 cents, or 0.13%, at $61.10 per barrel.

Progress in a long-running trade dispute between the United States and China, the world’s two biggest oil consumers, has boosted expectations for higher energy demand next year.

China on Thursday announced a list of import tariff exemptions for six oil and chemical products from the United States, days after the world’s two largest economies announced an interim trade deal set to be signed at the beginning of January.

“A world with less uncertainty (following last week’s proposed U.S.-China trade agreement) was the real driver of the market optimism on the 2020 outlook,” ANZ Research said in a note.

JP Morgan and Goldman Sachs raised its 2020 oil price outlook earlier this week amid OPEC-led output cuts and an improved global trade outlook.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia agreed in early December to make a further cut of 500,000 barrels per day (bpd) from Jan. 1 on top of previous reductions of 1.2 million bpd.

The trade deal progress aside, a drop in U.S. crude inventories also supported oil prices to hold near three-month highs.

“Crude prices continued their stellar performance into year-end, nudged along by the more benevolent inventory data published by the EIA,” said Stephen Innes, market strategist at AxiTrader.

“Product demand is up, and with a more constructive global growth outlook than at any time of this year, oil markets remain supported by the fundamental backdrop,” Innes added.

U.S. crude oil stockpiles fell by 1.1 million barrels to 446.8 million barrels in the week to Dec. 13, the Energy Information Administration (EIA) said on Wednesday.

ANZ Research also said “an expected fall in U.S. drilling activity should support oil prices.”

A U.S. weekly drilling report by energy services firm Baker Hughes is due to be released on Friday. U.S. drilling firms added 4 oil rigs in the week to Dec. 13, bringing the total count to 667.

Oil prices surf US-China trade thaw to three-month highs

CNBC

Reuters
KEY POINTS
  • Brent crude futures edged up 8 cents to $66.25 a barrel by 0645 GMT.
  • U.S. West Texas Intermediate (WTI) crude gained 4 cents to $60.97.
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The oil tanker ‘Devon’ prepares to transfer crude oil from Kharg Island oil terminal to India in the Persian Gulf, Iran, on March 23, 2018.
Ali Mohammadi | Bloomberg | Getty Images

Oil prices remained atop three-month peaks on Thursday, extending a robust streak that began a week ago, as thawing trade relations between the United States and China supported global markets.

Brent crude futures edged up 8 cents to $66.25 a barrel by 0645 GMT, while U.S. West Texas Intermediate (WTI) crude gained 4 cents to $60.97.

Trading volume was thin, with not even news of President Donald Trump’s impeachment by the U.S. House of Representatives stirring the oil market.

“We’re near the top of trading ranges for both Brent and WTI so it’s interesting to see them holding here,” said Michael McCarthy, chief market analyst at CMC Markets in Sydney.

While there is a clear uptrend in place on the daily technical price chart for WTI to potentially move towards $61.50 a barrel, there are also near-term risks — touching that price level may encourage traders to sell, McCarthy said.

″(Trading) volumes are terrible. A lot of people have given up for the year with no scheduled events to push oil markets around,” he said. The trend leaves oil prices set to rise for a third consecutive week, surfing momentum from announcements this month about deeper output cuts by major producers as well as the ‘Phase One’ deal between the United States and China to resolve their long-running trade war.

The deal between the world’s two largest economies has improved the global economic outlook, lifted the prospect for higher energy demand next year and underpinned oil prices.

In a further sign of thawing relations, China’s finance ministry on Thursday published a new list of six U.S. products that will be exempt from tariffs starting Dec. 26.

Just the week before, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers such as Russia agreed to deepen production cuts by a further 500,000 barrels per day (bpd) from Jan. 1 on top of previous reductions of 1.2 million bpd.

According to weekly data released by the Energy Information Administration on Wednesday, U.S. crude inventories dropped 1.1 million barrels in the week to Dec. 13, while gasoline and distillates stockpiles rose.

Oil skids as U.S. inventories pile up, but demand hopes stem bigger drop

REUTERS

SINGAPORE (Reuters) – Oil prices dropped on Wednesday after U.S. industry data showed a surprise build in crude inventories, but expectations for firmer demand next year kept losses in check.

Brent crude futures LCOc1 dropped 38 cents, or 0.57%, to $65.72 a barrel by 0730 GMT on Wednesday. The international benchmark rose 1.2% to $66.10 a barrel on Tuesday.

West Texas Intermediate (WTI) crude futures CLc1 fell 46 cents, or 0.75%, to $60.48 per barrel.

Wednesday’s declines followed a gain of more than 1% in the previous session as the “phase one” U.S.-China trade deal announced last week eased pressure on the oil benchmarks.

Prior to the agreement, oil markets were hampered by worries over the economic impact of the trade dispute between the world’s two biggest oil consumers.

“The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly U.S. crude inventory report,” said Stephen Innes, market strategist at AxiTrader. However, he added that “it’s unlikely to be a game-changer.”

“Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020.”

U.S. crude inventories climbed 4.7 million barrels in the week to Dec. 13 to 452 million, compared with analysts’ expectations for a draw of 1.3 million barrels, data from industry group the American Petroleum Institute showed.

But a drop in official inventory data from the U.S. Energy Information Administration (EIA) due later on Wednesday could give oil more upward impetus, said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

The drop in prices Wednesday morning “are minuscule, with oil’s price action continuing to be constructive,” Halley said.

Deeper production cuts coming from the Organization of the Petroleum Exporting Countries and allies such as Russia – a group known as OPEC+ – also continued to support market sentiment and prevented a further slide in prices.

OPEC+, which has cut production by 1.2 million barrels per day (bpd) since Jan. 1 this year, will make a further oil supply cut of 500,000 bpd from Jan. 1, 2020, to support the market.

Reporting by Koustav Samanta; Editing by Jacqueline Wong and Tom Hogue