Oil prices pressured by economic slowdown, but Saudi commitment to supply cuts supports

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Reuters
KEY POINTS
  • Front-month Brent crude futures were at $61.06 at 0200 GMT. That was 22 cents, or 0.4%, below last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $53.08 per barrel, down 17 cents, or 0.3%, from their last settlement.
Reusable: Oil storage refinery Australia Caltex Oil 141014
Jason Reed | Reuters

Oil prices were pressured on Tuesday by an economic slowdown that has started to impact fuel consumption, although some support came from a Saudi Arabian statement that consensus was emerging with other producers over extending supply cuts.

Front-month Brent crude futures were at $61.06 at 0200 GMT. That was 22 cents, or 0.4%, below last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $53.08 per barrel, down 17 cents, or 0.3%, from their last settlement.

Oil futures are around 20% below 2019 peaks reached in late April, with falls in May the sharpest monthly declines since November.

That has come as financial traders sell out of oil futures amid growing concerns about the outlook for the world economy and oil consumption.

Saudi Energy Minister Khalid al-Falih said on Monday that a consensus was emerging among producers to continue working “to sustain market stability” in the second-half of the year.

The Middle East dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC), together with some allies including Russia, has been withholding supply since the start of the year to prop up the market.

The group plans to decide later this month or in early July whether to continue withholding supply.

Meanwhile, U.S. oil output has been soaring, making the country the world’s biggest crude producer, at 12.3 million barrels per day (bpd) at the end of May, versus 11.11 million bpd produced in Russia and 9.65 million bpd pumped out of the ground in Saudi Arabia.

With U.S. production surging, more of its oil is being exported, with a record of six super-tankers scheduled for loading at the Louisiana Offshore Oil Port (LOOP) between late May and early June.

Economic worries

Ole Hansen, head of commodity strategy at Saxo Bank, said “the tight supply focus (is) switching to increased risk of lower growth and demand,” and that “an escalation of the U.S.China trade war has added further downside risks to already slowing economies. ”

South Korea’s economy shrank by 0.4% in the first quarter while core inflation slowed to a near 20-year low in May, data showed on Tuesday, pointing to a further economic slowdown in Asia.

“Slowing economic activity now threatens to derail our base case of robust cyclical (oil) demand growth,” Bank of America Merrill Lynch said in a note.

Oil prices gain after fall in US crude inventories

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Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.4%, at $59.07 a barrel by 0258 GMT. They closed down 0.6% on Wednesday after hitting their lowest since March 12 at $56.88.
  • Brent crude futures, the international benchmark for oil prices, were up 14 cents, or 0.2 percent, at $69.59 a barrel. They fell nearly 1% in the previous session after dropping as low as $68.08.
RT: Iran oil platform and Iranian flag 050725
A gas flare on an oil production platform is seen alongside an Iranian flag in the Gulf.
Raheb Homavandi | Reuters

Oil prices rose on Thursday after an industry report showed a decline in U.S.crude inventories that exceeded analyst expectations.

U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.4%, at $59.07 a barrel by 0258 GMT. They closed down 0.6% on Wednesday after hitting their lowest since March 12 at $56.88.

Brent crude futures, the international benchmark for oil prices, were up 14 cents, or 0.2 percent, at $69.59 a barrel. They fell nearly 1% in the previous session after dropping as low as $68.08.

Crude prices have been supported by output cuts by OPEC and other major producers as well as falling supplies from Iran, but signs of China’s readiness to escalate a trade war with the United States have raised concerns about future demand.

U.S. crude inventories fell by 5.3 million barrels in the week to May 24 to 474.4 million barrels, data from industry group, the American Petroleum Institute, showed.

That was a much larger drop than the 900,000-barrel fall expected by analysts polled by Reuters.

Weekly U.S. oil inventory data has been delayed by Monday’s Memorial Day holiday, with the official data from the Energy Information Administration (EIA) due on Thursday at 11 a.m. EDT (1500 GMT).

“If we do get a decent draw with U.S. inventories from the EIA report, we should see crude continue to stabilize,” Edward Moya, senior market analyst at OANDA in New York told Reuters in an email.

Crude prices remain supported by overall supply tightness.

Iranian May crude exports fell to less than half of April levels at around 400,000 barrels per day (bpd), tanker data showed and two industry sources said, after the United States tightened sanctions on Tehran’s main source of income.

Official data released on Thursday in Japan showed imports of Iranian surged more than 800 percent in April, from a year earlier, as refiners stocked up on crude from the country before the U.S. ended waivers on sanctions this month.

Many expect supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to be extended in a meeting next month.

Crude prices have risen by about 30 percent since the start of the year when OPEC+, which includes Russia, cut production to reduce a global glut.

Oil drops as trade war concerns outweigh supply disruptions

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $69.60 a barrel at 0332 GMT, down 51 cents, or 0.7%, from the last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $58.50 per barrel, down 64 cents, or 1.1%, from their last settlement.
RT: China oil refinery workers
Employees close a valve of a pipe at a PetroChina refinery in Lanzhou, Gansu province.
Stringer | Reuters

Oil prices fell on Wednesday on concerns the Sino-U.S. trade war could trigger a global economic downturn, but relatively tight supply amid OPEC output cuts and political tensions in the Middle East offered some support.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.60 a barrel at 0332 GMT, down 51 cents, or 0.7%, from the last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $58.50 per barrel, down 64 cents, or 1.1%, from their last settlement.

“Crude oil was weak … primarily as the bears on demand are winning compared to the bulls on supply,” James Mick, managing director and energy portfolio manager with U.S. investment firm Tortoise, said in an investor podcast.

“Investors are concerned from a macro perspective about worldwide demand, particularly in the face of the growing trade dispute between the U.S. and China, ” he said.

Fawad Razaqzada, analyst at futures brokerage Forex.com, said another concern was that “falls in emerging market currencies (are) making dollar-priced crude oil dearer to purchase in those nations” and that crude prices could fall back.

Despite the economic concerns, global oil demand is so far holding up well, likely averaging over 100 million barrels per day (bpd) this year for the first time, according to data from the U.S. Energy Information Administration (EIA).

But analysts are concerned that tightening credit amid the economic slowdown will hamper trading in commodities.

“We remain cautious regarding the short-term macroeconomic environment,” commodity brokerage Marex Spectron said in a note.

“Credit availability on the physical commodity markets is of particular concern.”

Eastport, a Singapore-based tanker brokerage, had similar concerns.

“An increase in caution and risk aversion could weigh on economic growth,” it said in a note on Wednesday.

Despite these concerns dragging on oil markets, crude prices remain relatively tight.

“Supply risks remain at elevated levels with continued geopolitical uncertainty in the Middle East, as well as Venezuela’s well-known struggles, ” said Tortoise’s Mick.

Adding to this are ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) since the start of the year to prop up the market.

OPEC and some allies including Russia are due to meet in late June or early July to discuss output policy going forward.

Oil mixed as OPEC cuts, U.S. sanctions prop up prices while trade war weighs

SINGAPORE (Reuters) – Oil prices were mixed on Tuesday as supply cuts, led by producer club OPEC, and U.S. sanctions on fuel exports from Iran and Venezuela supported crude, while concerns about an economic slowdown weighed on the market.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.99 at 0637 GMT, down 12 cents, or 0.2%, from the last session’s close, when they rose 2.1%.

U.S. West Texas Intermediate (WTI) crude futures were at $59.03 per barrel, up 40 cents, or 0.7%, from their last close on Friday. WTI did not trade on Monday due to a U.S. public holiday.

Prices have been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) since the start of the year, and by political tensions in the Middle East.

OPEC and some allies including Russia are due to meet on June 25 and 26 to discuss output policy.

Beyond the output cuts, U.S. bank, Citi said, “Geopolitical turmoil across the Middle East … are likely to encourage financial investors to realign with their bullish physical counterparties.”

In physical oil markets, Middle East crude premiums hit their highest levels in years earlier this month amid falling supply.

Beyond the OPEC cuts, U.S. sanctions on petroleum exports from Iran and Venezuela have tightened markets.

“Iran exports remain under pressure as U.S. sanctions bite. This comes as OPEC appears to be heading towards extending the current production cut agreement,” Citi added.

Trump last year withdrew the United States from a 2015 international nuclear deal with Iran, and Washington is ratcheting up sanctions seeking to end Tehran’s international sales of crude oil and strangle its economy.

Washington has also imposed sanctions on Venezuela’s oil exports, in a bid to topple the government under President Nicolas Maduro there.

Despite this, markets remain cautious amid an economic slowdown as a result of the ongoing trade war between the United States and China, which is also expected to dent fuel consumption.

“We really need to see some strong demand figures, which so far this year has not happened, before we can really start listening to the bulls,” said Matt Stanley, a broker at Starfuels in Dubai.

Reporting by Henning Gloystein; Editing by Richard Pullin and Joseph Radford

Oil prices rise amid OPEC supply cuts, but trade worries weigh

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.
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Andrew Burton | Getty Images

Oil prices rose on Monday as ongoing supply cuts led by producer club OPEC kept markets relatively tight, but Brent remained below $70 per barrel on concerns over an ongoing trade war between the United States and China.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.

“The relative strength of the very short end of the curve likely reflects the market pricing in a known variable of lower supplies from OPEC+,” said Edward Bell, commodity analyst at Emirates NBD bank.

A group of producers led by the Organization of the Petroleum Exporting Countries (OPEC), known as OPEC+, has been withholding supply since the start of the year to tighten the market and prop up prices.

But Monday’s gain could not make up for falls last week, when both crude futures contracts registered their biggest price declines this year amid concerns that the Sino-American trade dispute could accelerate a global economic slowdown.

Money managers cut their net long U.S. crude futures and options positions in the week to May 21, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

“Some signs of low confidence are creeping into positioning data,” Bell said.

In oil futures markets, the trade war effect is better seen beyond the spot market.

“The impact from a trade war is a more medium- to long-term issue and Dec. spreads weakened sharply over the last week,” he said.

Beyond financial markets, there are also signs on the ground of a slowdown in oil demand growth.

China’s automobile sales, a key driver of global oil demand growth, will reach around 28.1 million units this year, unchanged from levels seen in 2018, when the country’s auto market contracted for the first time in more than two decades, state news agency Xinhua reported on Sunday.

The outlook for flat car sales may be too optimistic still, as monthly sales have so far declined for 10 consecutive months.

A bright spot for carmakers, although not for the oil industry, is that sales of new energy vehicles are likely to grow by about 27 percent to hit 1.6 million units, from 1.26 units in 2018, the report said.