Oil prices rise on likelihood of ongoing OPEC+ supply cuts

CNBC

Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $54.43 per barrel, 44 cents, or 0.8%, above their last settlement.
Reusable: Shell Oil Polar Pioneer oil rig
Shell Oil’s drilling rig Polar Pioneer in Port Angeles, Wash., on May 12, 2015.
Jason Redmond | Reuters

Oil prices rose on Monday after Saudi Arabia said producer club OPEC and Russia were likely to keep withholding supplies, and in relief that the United States and Mexico averted a trade war that would have damaged the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $54.43 per barrel, 44 cents, or 0.8%, above their last settlement.

Traders said crude prices were rising because of statements by OPEC’s de-facto leader Saudi Arabia on Friday saying that the group was close to agreeing extended supply cuts.

“With a production cut extension now sounding more likely than not, it should be incredibly supportive for oil prices,” said Stephen Innes, Managing Partner at Vanguard Markets.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-members, including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.

“Also with the Mexican stalemate averted and no harmful shockwaves from this weekend G-20 meeting, risk assets should open with a bounce in their step and oil could trade favorably as WTI and Brent will continue to track the broader risk environment high,” Innes said.

Stock markets jumped on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week averted a tariff war between the neighbors.

Oil prices hover near January lows amid surging supply, economic slowdown

CNBC

Reuters

KEY POINTS
  • Front-month Brent crude futures were at $60.78 at 0246 GMT. That was 15 cents, or 0.3%, above last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.84 per barrel, 16 cents, or 0.3%, above their last settlement.
Reusable CNBC: oil drilling rig West Texas 150825-Brennan
Morgan Brennan | CNBC

Oil prices steadied on Thursday after falling to near 5-month lows in the previous session, but sentiment remained weak as markets are under pressure from rising U.S. supply and a stalling economy.

Front-month Brent crude futures were at $60.78 at 0246 GMT. That was 15 cents, or 0.3%, above last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.84 per barrel, 16 cents, or 0.3%, above their last settlement.

Brent and WTI on Wednesday hit their lowest levels since mid-January at $59.45 and $50.60 per barrel, respectively, amid a surge in U.S. crude inventories and record production, and as a global economic slowdown was starting to hit energy demand.

Despite Thursday’s gains, oil markets have moved into bear territory as defined by a 20% fall from recent peaks reached in late April.

U.S. crude production rose to a record 124.4 million barrels per day (bpd) in the week to May 31, the Energy Information Administration (EIA) said on Wednesday, an increase of 1.63 million bpd since May 2018.

Amid surging output, U.S. commercial crude inventories surged by 6.8 million in week to May 31, to 483.26 million barrels, their highest levels since July 2017.

“Rising U.S. production is more than offsetting the efforts from the OPEC+ and if we add the negative effect a trade war could have on energy demand the result is lower prices,” said Alfonso Esparza, senior analyst at futures brokerage OANDA.

The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers including Russia, known as OPEC+, have been withholding oil supply since the start of the year to prop up the market.

But outside OPEC+ supply is rising, not just in the United States.

Oil output at Kazakhstan’s Kashagan field reached a record 400,000 bpd this week, industry sources told Reuters.

Output rose after completion of maintenance in May. Prior to that, production at Kashagan was about 330,000 to 340,000 bpd.

With supply ample despite the OPEC-led cuts, much will depend on demand.

Bank of America Merrill Lynch said this week “global oil demand growth is running at the weakest rate since 2012” at below 1 million bpd, and that this was “leading the selloff” in oil prices recently.

Global economic growth took a dip late last year before recovering in early 2019, but analysts now warn growth is stalling again.

“The nascent recovery has stalled amid trade tensions,” Morgan Stanley said.

The U.S. bank said it expected this downturn to result in “the lowest growth rate since global financial crisis” of 2008/2009.

Political risks may be supporting oil prices, but that’s likely just short term, JP Morgan says

KEY POINTS
  • Oil prices jumped on Monday after Saudi Energy Minister Khalid al-Falih indicated there was a consensus among OPEC and allied oil producers to continue limiting supply.
  • Still, the current price support is likely short-lived due to the rise of U.S. shale energy, which has shortened the market cycle for oil, according to a J.P. Morgan expert.
  • “It’s difficult to make a case why oil prices materially move up from here,” said Scott Darling, J.P. Morgan’s head of Asia Pacific oil and gas research.

Oil prices jumped on Monday after Saudi Arabia indicated a possible rollover of output curbs amid political supply risks, but that support is likely to be short-lived due to fundamental changes in the energy industry, an expert said on Monday.

“It’s alright to talk about supply-side risks, but that’s sort of near-term … I don’t think expectations for oil prices have actually gone up,” said Scott Darling, J.P. Morgan’s head of Asia Pacific oil and gas research.

That’s because of the rise of U.S. shale energy and slowing demand due to global economic uncertainties, Darling told CNBC’s “Squawk Box.” J.P. Morgan expects OPEC to extend its oil output cuts to 2020.

Oil prices jumped on Monday after Saudi Energy Minister Khalid al-Falih indicated there was a consensus among OPEC and allied oil producers to continue limiting supply.

Falih said the main option discussed at a ministerial panel meeting during the day was for a rollover of the output curbs agreed by OPEC and non-members in the second half of 2019. Still, he said, “things can change by June.”

OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.

Brent crude futures were at $73.23 a barrel at 12:06 p.m. HK/SIN, up $1.02, or 1.4%, from their last close. Brent closed down 0.6% on Friday.

J.P. Morgan’s forecast for Brent crude is $75 per barrel by the end of the second quarter of 2019. For the full year, however, Brent crude will average $71 a barrel for 2019 and will weaken to $60 a barrel from 2021, said Darling.

Darling’s comments come as the market expects Iranian oil exports to drop further in May and Venezuelan shipments could fall again in coming weeks due to U.S. sanctions.

Moreover, tensions between Saudi Arabia and Iran are running high after last week’s apparent attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the kingdom.

Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi group claimed responsibility. The UAE has blamed no one for the tanker sabotage. Iran has distanced itself from both sets of attacks.

The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased U.S. military presence in the Gulf over perceived Iranian threats to U.S. interests.

Still, the current price support is likely short-lived due to the rise of U.S. shale energy, which has shortened the market cycle for oil, according to the J.P. Morgan expert.

“It’s difficult to make a case why oil prices materially move up from here,” said Darling.

—Reuters contributed to this report.

Oil prices tumble by more than 2 percent after Trump announces new tariffs on Chinese goods

Reuters
  • U.S. West Texas Intermediate (WTI) crude futures were at $60.44 per barrel at 0032 GMT on Monday, down $1.50 per barrel, or 2.4 percent, from their last settlement.
  • Brent crude oil futures were at $69.34 per barrel, down $1.51 per barrel, or 2.1 percent, from their last close.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices tumbled by more than 2 percent on Monday after U.S. President Donald Trump on Sunday said he would sharply hike tariffs on Chinese goods this week, risking derailing months of trade talks between the world’s two biggest economies.

U.S. West Texas Intermediate (WTI) crude futures were at $60.44 per barrel at 0032 GMT on Monday, down $1.50 per barrel, or 2.4 percent, from their last settlement.

Brent crude oil futures were at $69.34 per barrel, down $1.51 per barrel, or 2.1 percent, from their last close.

Trump on Sunday said on Twitter he would drastically hike U.S. tariffs on Chinese goods this week, pulling down global financial markets, including crude oil futures.

The Wall Street Journal reported that Beijing is considering canceling all trade talks with Washington.

“Trump has taken the proverbial sledgehammer to the walnut this morning … by threatening to slap a 25 percent tariff on a mind-boggling $525 billion of Chinese goods by this Friday,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

Within the oil industry, there are signs of a further rise in output from the United States, where crude production has already surged by more than 2 million barrels per day (bpd) since early 2018, to a record 12.3 million bpd. That has made the United States the world’s biggest producer ahead of Russiaand Saudi Arabia.

The number of rigs drilling for gas in the United States fell by 3 to 183 in the week to May 3, while oil-directed drilling rigs rose by 2 to 807, data from oil services firm Baker Hughes showed on Friday.

Oil set for weekly decline amid surging US output, expected OPEC increase

CNBC

Reuters

KEY POINTS
  • Brent crude oil futures were at $70.38 per barrel at 0440 GMT, down 37 cents, or 0.5 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were down 20 cents, or 0.3 percent, at $61.61 per barrel.
RT: Venezuela oil pumps over water 150520
Oil pumps are seen in Lake Maracaibo, in Lagunillas, Ciudad Ojeda, in the state of Zulia, Venezuela.
Isaac Urrutia | Reuters

Oil prices on Friday were set to fall for the week as surging U.S. output and an expected supply increase from the Organization of the Petroleum Exporting Countries (OPEC) weighed on markets.

Brent crude oil futures were at $70.38 per barrel at 0440 GMT, down 37 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 20 cents, or 0.3 percent, at $61.61 per barrel.

Brent is set for a weekly fall of 2.5 percent, while WTI has declined 2.6 percent so far, its second straight weekly drop.

“Oil prices have fallen as the pressure of record U.S. output levels continues to weigh,” said Mihir Kapadia, chief executive officer of Sun Global Investments.

U.S. crude oil production reached a record 12.3 million barrels per day (bpd) last week, rising by around 2 million bpd over the past year. U.S. crude exports broke through 3 million bpd for the first time this year, according to data from the Energy Information Administration.

Traders said prices also fell as Russia started sending clean oil through a pipeline towards western Europe, after several countries last week halted imports because of contamination. In Poland, the government released strategic reserves to ensure supply.

“In Eastern Europe, countries have secured supplies to offset shipments halted due to contamination,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

In the United States, analysts say supply will rise further as its export infrastructure is improved.

“One of the things that we can see in the near future is the de-bottlenecking of the Permian basin in the U.S. through new pipelines and export capacity. This will connect the world’s largest shale basin to the global oil market,” said Will Hobbs, chief investment officer for Barclays Investment Solutions.

Rising U.S. oil production has helped offset some of the disruptions from U.S. sanctions against Iran and Venezuela, and from supply cuts led by the Middle East-dominated OPEC, which started in January.

Despite these disruptions and sharp oil price rises in the first months of this year, some analysts say the long-term price risk to crude oil is skewed to the downside.

Erik Norland, senior economist at commodity derivative exchange CME Group, said “the 130 percent rise in U.S. production due to the shale oil revolution” during the past decade had created a strong and constant downside risk to oil prices, which was visible in exchange trading positions.

“Observers of the oil markets might be surprised to discover that during the past decade, out-of-the-money (OTM) put options were more expensive than OTM calls 92.5 percent of the time for crude oil,” he said.

“In other words, oil traders have spent much more time during the past decade worried about downside risks than prices heading higher,” Norland added.