Oil edges up on tighter supply, but demand concerns check gains

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Reuters
KEY POINTS
  • Brent crude rose 9 cents, or 0.2%, to $42.28 a barrel by 0009 GMT, while U.S. crude was at $39.76 a barrel, up 1 cent.
  • Both contracts rose about 9% last week and Brent crude futures flipped into backwardation, where oil for immediate delivery costs more than supply later, usually an indication of tightening supply.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil prices nudged higher on Monday on tighter supplies from major producers, but concerns that a record rise in global coronavirus cases could curb a recovery in fuel demand checked gains.

Brent crude rose 9 cents, or 0.2%, to $42.28 a barrel by 0009 GMT, while U.S. crude was at $39.76 a barrel, up 1 cent.

Both contracts rose about 9% last week and Brent crude futures flipped into backwardation, where oil for immediate delivery costs more than supply later, usually an indication of tightening supply.

In the United States and Canada, the number of operating oil and natural gas rigs fell to a record low even as higher oil prices prompt some producers to start drilling again.

Iraq and Kazakhstan pledged to comply better with oil production cuts during an OPEC+ panel on Thursday.

However, the OPEC+ group, consisting of Organization of the Petroleum Exporting Countries and its allies including Russia, has yet to decide whether to extend a record supply cut of 9.7 million barrels per day (bpd) for a fourth month in August.

Oil prices have also been supported by a recovery in fuel demand globally following a collapse in April-May during coronavirus shutdowns as countries across the world resume economic activities.

Still, the World Health Organization reported a record jump in global coronavirus cases on Sunday, with the biggest increase seen in north and south America.

Spikes in coronavirus infections in parts of the world such as Beijing and Australia’s second-most populous state Victoria have prompted authorities to reimpose movement restrictions to curb the spread.

“The potential economic damage of a new round of COVID-19 countermeasures will likely contain any investor enthusiasm,” said Michael McCarthy, chief market strategist at CMC Markets.

Oil prices inch up on faith in supply cuts, demand recovery

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures climbed 14 cents, or 0.4%, to $38.98 a barrel at 0101 GMT.
  • Brent crude futures crawled up 7 cents, or 0.2%, to $41.58 a barrel. Both contracts rose around 2% on Thursday.

Oil prices pushed higher in early trade on Friday, building on gains in the previous session, after OPEC producers and allies promised to meet their supply cut commitments and two major oil traders said demand was recovering well.

U.S. West Texas Intermediate (WTI) crude futures climbed 14 cents, or 0.4%, to $38.98 a barrel at 0101 GMT, while Brent crude futures crawled up 7 cents, or 0.2%, to $41.58 a barrel. Both contracts rose around 2% on Thursday.

Plans by Iraq and Kazakhstan to compensate for overproduction in May on their supply cut commitments supported the market. The promises came out of a meeting by a panel monitoring compliance by the Organization of Petroleum Exporting Countries and its allies, a grouping called OPEC+.

If the laggard producers do compensate over the next three months for their overproduction, that will effectively take extra barrels out of the market, even if OPEC+ does not extend its record 9.7 million barrels per day supply cut beyond July.

Comments from global oil traders Vitol and Trafigura on a rebound in oil demand in June, reported by Bloomberg, also buoyed the market, ANZ Research said.

Trading volumes on Friday, however, were thin, which pointed to a lack of conviction behind any big push higher, said CMC Markets chief strategist Michael McCarthy.

On the technical side, he pointed to strong resistance in the WTI contract between $40 and $41. Analysts see that level as the point at which more U.S. producers will revive shut-in wells.

“That militates against aggressive long side trading,” McCarthy said.

Oil prices fall on demand concerns as coronavirus cases rise

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures dropped 2.1%, or 80 cents, to $37.16 a barrel at 0138 GMT, adding to a loss of 42 cents on Wednesday.
  • Brent crude futures fell 1.5%, or 61 cents, to $40.10 a barrel. The benchmark contract declined 25 cents on Wednesday.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
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 fell around 2% on Thursday as a spike in new coronavirus cases in China and the United States renewed fears that people would stay home, stalling a recovery in fuel demand even as lockdowns ease.

U.S. West Texas Intermediate (WTI) crude futures dropped 2.1%, or 80 cents, to $37.16 a barrel at 0138 GMT, adding to a loss of 42 cents on Wednesday.

Brent crude futures fell 1.5%, or 61 cents, to $40.10 a barrel. The benchmark contract declined 25 cents on Wednesday.

Worries about fuel demand rose after a surge in coronavirus cases led Beijing to cancel flights and shut schools and several U.S. states, including Texas, Florida and California, reported sharp increases in new cases.

A rise in U.S. crude stockpiles to a record high for a second week in a row also weighed on sentiment, even though U.S. government data showed inventories of gasoline and distillate, which include diesel and heating oil, fell.

“People are concerned about the coronavirus resurging in China and crude stockpiles rising,” said Lachlan Shaw, head of commodity research at National Australia Bank.

While prices dipped, they are likely to remain in the $35 to $40 band they have been trading in so far in June, with the Organization of the Petroleum Exporting Countries and its allies, a grouping called OPEC+, mostly sticking to promised supply cuts, U.S. shale producers holding back output, and fuel demand gradually improving, analysts said.

OPEC+ compliance with crude production cut commitments in May was 87%, two OPEC+ sources said on Wednesday.

However OPEC warned in a monthly report the market would remain in surplus in the second half of 2020 even as demand improves, as it now expects supply from outside the group to be about 300,000 barrels per day higher than earlier thought.

“OPEC’s dour assessment” added to negative sentiment, ANZ said in a note.

Oil slumps as U.S. crude stocks build amid virus resurgence fears

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Reuters
KEY POINTS
  • Brent crude futures were down 89 cents, or 2.2%, at $40.07 a barrel as of 0348 GMT.
  • U.S. West Texas Intermediate (WTI) futures fell $1.13, or 2.9%, to $37.25 a barrel.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
Michael Heiman | Getty Images

Oil prices fell on Wednesday as data showed an increase in U.S. crude and fuel inventories, raising the prospect of oversupply as a potential second wave of the coronavirus pandemic threatened to halt any recovery of demand.

Brent crude futures were down 89 cents, or 2.2%, at $40.07 a barrel as of 0348 GMT, and U.S. West Texas Intermediate (WTI) futures fell $1.13, or 2.9%, to $37.25 a barrel.

Both benchmarks rose more than 3% on Tuesday, after the International Energy Agency (IEA) raised its 2020 oil demand forecast to 91.7 million barrels per day (bpd) and U.S. retail sales posted a record jump in May.

The rise in U.S. crude and fuel inventories, however, stoked concerns about a surplus and pressured oil prices, as the number of coronavirus infections surpassed 8 million globally and several U.S. states saw their case numbers spike.

“API data showed a build in crude inventories, and rising new coronavirus cases in the United States and China have dampened expectations of improving fuel demand in the world’s top two oil consumers,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

U.S. crude oil inventories rose by 3.9 million barrels in the week to June 12 to 543.2 million barrels, according to data from industry group the American Petroleum Institute, countering expectations for a fall of 152,000 barrels.

Gasoline stocks rose by 4.3 million barrels and distillate fuels, which include diesel and heating oil, rose 919,000 barrels.

Official data from the U.S. Department of Energy’s Energy Information Administration is due later on Wednesday.

An OPEC-led panel will meet on Thursday to further discuss ways to strengthen and review compliance with producers’ commitment to curb oil output.

Iraq reduced its oil exports by 8%, or 300,000 bpd, so far in June, indicating OPEC’s second-largest producer is stepping up efforts to adhere to its pledged cut.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, agreed to cut output by 9.7 million bpd — about 10% of pre-pandemic demand — to the end of July.

Oil prices drop as rise in coronavirus cases stokes fuel demand fears

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Reuters
KEY POINTS
  • Brent crude fell 20 cents, or 0.5%, at $39.52 a barrel by 0424 GMT, having gained 2.6% on Monday.
  • U.S. oil dropped 21 cents, or nearly 0.6%, to $36.91 a barrel, after closing 2.4% higher in the previous session.
  • Coronavirus cases rose to more than 8 million worldwide by Monday, with infections surging in Latin America, while the United States and China are dealing with fresh outbreaks. But some observers said they didn’t expect to see any return to the stringent lockdowns seen at the start of the year.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices slid on Tuesday on lingering concerns over the threat to fuel demand from the resurgence of new coronavirus infections around the world, though hopes for further cuts in crude supplies stemmed losses.

Brent crude fell 20 cents, or 0.5%, at $39.52 a barrel by 0424 GMT, having gained 2.6% on Monday. U.S. oil dropped 21 cents, or nearly 0.6%, to $36.91 a barrel, after closing 2.4% higher in the previous session.

Coronavirus cases rose to more than 8 million worldwide by Monday, with infections surging in Latin America, while the United States and China are dealing with fresh outbreaks. But some observers said they didn’t expect to see any return to the stringent lockdowns seen at the start of the year.

“While the run of COVID-19 headlines emphasise that a demand recovery is likely to be a slow process, it seems unlikely that we see a return to the lockdown measures of 1H,” said Stephen Innes, Chief Global Markets Strategist at AxiCorp, in a note.

Hopes of more cuts in oil supplies by major producers also helped prevent steeper price drops, analysts said.

Prices rose on Monday after the United Arab Emirates’ energy minister expressed confidence that OPEC+ producers – members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – that have not been in full compliance with previously agreed cuts would up their game.

“Renewed optimism that OPEC+ production cuts could remain in place if we see second-wave (coronavirus) concerns intensify have oil prices refusing to enter freefall,” said Edward Moya, senior market analyst at OANDA.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a grouping known as OPEC+, agreed this month to extend production cuts of 9.7 million barrels per day through July. They also called on members that have not been complying to make up their commitments with extra cuts later.

Elsewhere U.S. shale producers are also cutting back on drilling amid the collapse in demand for oil.

Production from seven major U.S. shale formations is likely to drop to close to a two-year low of 7.63 million barrels per day by July, the U.S. Energy Information Administration said on Monday.

U.S. drillers have slashed production and the number of oil rigs fell below 200 last week, the lowest since June 2009, according to energy services company Baker Hughes Co.