US oil prices rebound after tumbling to lowest since June 2017 on economy fears

CNBC

  • U.S. crude futures gained 0.68 percent, at $42.82 per barrel, at 0355 GMT.
  • Meanwhile, Brent crude oil futures slipped 0.22 percent at $50.36 per barrel.
  • Both Brent and U.S. crude futures plunged to their weakest levels in more than a year in the previous session.

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Andrew Burton | Getty Images

Oil prices were mixed in thin trading on Wednesday as the U.S. benchmark rebounded from steep losses in the previous session, even though concern over the health of the global economy continued to overshadow the market in the longer term.

U.S. West Texas Intermediate (WTI) crude futures, were up 29 cents, or 0.68 percent, at $42.82 per barrel, at 0355 GMT, having at one point risen as high as 2 percent from the last close. They had slumped 6.7 percent in the previous session to $42.53 a barrel – the lowest since June 2017.

Meanwhile Brent crude oil futures were down 11 cents or 0.22 percent at $50.36 a barrel, having skidded 6.2 percent in the previous session to $50.47 a barrel, the weakest since August 2017.

“$50 is a psychological support level (for Brent),” said Margaret Yang, market analyst for CMC Markets in Singapore.

“But market confidence needs to be restored for oil price…that include an equity market rebound and/or a bigger production cut from major oil exporters,” Yang said, referring to an OPEC-led agreement to lower output from next month.

Broader financial markets have been under pressure on worries about a global economic slowdown amid higher U.S. interest rates and the U.S.-China trade dispute.

“U.S. equity futures are trading a bit firmer this morning triggering some little buying interest in the oil markets,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

But Innes added macroeconomics fears will continue unless the Organization of the Petroleum Exporting Countries (OPEC) “reassures markets the viability of their supply cuts and even impose deeper ones as some members have suggested”. OPEC and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day from January.

Russian Energy Minister Alexander Novak said on Tuesday that oil prices would become more stable in the first half of 2019, supported by OPEC and non-OPEC countries’ joint efforts to cut output.

Elsewhere, U.S. political turmoil triggered by the partial shutdown of the federal government is also adding to market concerns. President Donald Trump said on Tuesday that shutdown could last until his demand for U.S.-Mexico border wall money is met.

Russia’s Rosneft to take control of major Kurdish oil pipeline

CNBC

  • The deal is part of President Vladimir Putin’s bid to boost Russian influence
  • Investment in the pipeline is seen at $1.8 billion

Andrey Rudakov | Bloomberg | Getty Images

Russian energy major Rosneft has agreed to take control of the main oil pipeline in Iraq’s Kurdistan, further boosting its role as the main international investor in the semi-autonomous region.

The move is an apparent part of a broader strategy by President Vladimir Putin to ratchet up Moscow’s political and economic influence in the Middle East. It came amid the crisis in Kurdistan’s relations with the central government in Baghdad, which erupted after the region held an independence referendum last month.

Rosneft said its share in the project may total as much as 60 percent, while the current pipeline operator KAR Group will retain 40 percent.

Sources familiar with the deal said Rosneft’s investment in the project was seen totaling about $1.8 billion.

The deal comes days after Baghdad threatened to re-route a big chunk of oil flows towards an old oil pipeline, which has been out of operation for several years since Kurdistan built its own infrastructure to the Turkish Mediterranean port of Ceyhan.

The main lifters of the oil there are trading houses Vitol, Petraco, Glencore and most recently Rosneft via pre-financing deals.

Rosneft’s influential Chief Executive Officer Igor Sechin said on Thursday that Kurshish authorities and Baghdad have to resolve their differences by themselves.

Iraq, along with neighboring Iran and Turkey, has pledged to isolate Kurdistan in the wake of last month’s referendum.

That includes cutting off air and banking ties and reviving an old pipeline to Turkey to deprive Erbil of a big chunk of oil revenues.

Rosneft will be investing in expanding Erbil’s independent pipeline, which Baghdad has targeted, hoping to boost its capacity by a third to 950,000 barrels per day. That is the equivalent of about 1 percent of total global supply.

With Rosneft acquiring 60 percent in the project, the Kremlin oil major effectively becomes a controlling stakeholder in Kurdish oil infrastructure. That should give Erbil some sense of security as it faces unprecedented pressure from its neighbours.

Rosneft has already agreed to invest $400 million in five oil blocks in Iraqi Kurdistan.

It also had previously loaned Kurdistan $1.2 billion, guaranteed by oil sales, and is seeking to help Erbil build two major oil and gas pipelines.