Oil inches up, but rising Russian output still weighs

CNBC

  • Oil prices inched up on Tuesday.
  • There was pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all crude grades it sells to Asia in May.
  • One of the key price drivers going forward will be crude output from the U.S., which has risen by almost a quarter since mid-2016.

Getty Images

Oil prices inched up on Tuesday as rising Russian output and expectations of a reduction in Saudi Arabian crude prices were offset by a potential slowdown in U.S. production.

U.S. West Texas Intermediate crude futures were at $63.13 a barrel at 0434 GMT, up 11 cents from their previous settlement.

Brent crude futures rose to $67.80 per barrel, up 16 cents after falling by 2.5 percent on Monday.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said traders were wary of the fact that the market was still holding large amounts of long positions which will need to be sold off at some stage.

“That makes prices vulnerable to bad news,” he said, pointing to rising Russian production and the likely drop in Saudi physical crude prices.

Hedge funds and other speculators raised their net long positions in WTI futures and options in the week to March 27, the U.S. Commodity Futures Trading Commission said on Friday. That was the second consecutive increase and the amount of contracts held is close to the record reached in January.

Brent reached a 2018 high of $71.28 a barrel in January but has since struggled to pass that level. Two rallies last week ran out of steam just above $71.

There was also pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all the crude grades it sells to Asia in May.

This came amid rising supplies. Top producer Russia pumped 10.97 million barrels per day (bpd) of crude in March, up from 10.95 million bpd in February, official data showed, an 11-month high.

Saudi Arabia and Russia have led ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers outside of OPEC to cut back output to support prices.

One of the key price drivers going forward will be fuel inventories and crude output from the United States, which has risen by almost a quarter since mid-2016 to 10.43 million bpd, overtaking Saudi Arabia and coming in just shy of Russia.

The American Petroleum Institute (API) is due to publish fuel inventory data later on Tuesday.

“We expect for a gentle dip in prices today amidst bearish reports from the American Petroleum Institute (API),” Singapore-based Phillip Futures said.

Crude oil inventories are forecast to rise for a second week, gaining by 1.7 million barrels in the week to March 30, according to a Reuters poll on Monday.

Weekly production and inventory data by the Energy InformationAdministration (EIA) is due to be published on Wednesday.

“Production data released on Wednesday will offer a fresher clue on which direction prices are going,” Ma Kun, general manager of Energy and Chemicals at Bank of China International Futures said.

Oil prices fall on relentless rise in US crude output

CNBC

  • U.S. crude oil production soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.
  • U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency.

Rig supervisor David Crow shows off the oil rig he manages for Elevation Resources at the Permian Basin drilling site in Andrews County, Texas, May 16, 2016.

Ann Saphir | Reuters

Oil prices fell on Tuesday, extending losses from the previous session, as the inexorable rise in U.S. crude output weighed on markets.

U.S. West Texas Intermediate (WTI) crude futures were at $61.25 a barrel at 0414 GMT, down 11 cents, or 0.2 percent, from their previous close.

Brent crude futures were at $64.85 per barrel, down 10 cents, or 0.2 percent.

Both crude benchmarks dropped by around 1 percent in their Monday sessions.

“Oil prices fell on the back of concerns that surging U.S. production … could push inventories in the U.S. higher,” ANZ bank said on Tuesday.

U.S. crude oil production soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.

U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).

The rising U.S. output comes largely on the back of onshore shale oil production.

U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.

“Oil prices moved lower … after (the) Energy Information Administration published a report that crude production from seven major U.S. shale plays is expected to see a climb,” said Stephen Innes, head of trading for Asia Pacific at futures brokerage OANDA in Singapore.

That expected increase would top the 105,000 bpd climb in March from the previous month, to what was then expected to be a record high of 6.82 million bpd, the EIA said.

The EIA is due to publish its latest weekly U.S. production data on Wednesday.

Oil hits 2-week high as Saudi Arabia to keep output well below cap

CNBC

  • Oil prices extended gains to hit two-week highs on Monday.
  • Saudi Arabia’s oil minister said the country hoped OPEC and its allies will be able to relax production curbs next year and create a permanent framework to stabilize oil markets.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices extended gains to hit two-week highs on Monday, supported by comments from Saudi Arabia that it would continue to curb exports in line with the OPEC-led effort to cut global supplies.

U.S. West Texas Intermediate crude for April delivery was up 25 cents, or 0.4 percent, at $63.80 a barrel by 0301 GMT after rising 3 percent last week.

London Brent crude gained 13 cents, or 0.2 percent, to $67.44, after climbing nearly 4 percent last week.

Both benchmarks earlier hit their highest since Feb. 7.

“The rise in equities made it easier to buy risk assets such as oil,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

“But amid worries over U.S. crude production at near record highs, oil is struggling to make a move.”

Prices were supported after Saudi Arabian oil minister Khalid al-Falih on Saturday said the country’s oil production in January-March would be well below output caps, with exports averaging below 7 million barrels per day (bpd).

Saudi Arabia hopes OPEC and its allies will be able to relax production curbs next year and create a permanent framework to stabilize oil markets after the current supply cut deal ends this year, Falih added.

Jackie DeAngelis commodity hit

March seasonal turnaround for crude around the corner  

“A study is taking place and once we know exactly what balancing the market will entail we will announce what is the next step. The next step may be easing of the production constraints,” he told reporters in New Delhi.

“My estimation is that it will happen sometime in 2019. But we don’t know when and we don’t know how”.

U.S. energy companies last week added one oil rig, the fifth weekly increase in a row, bringing the total count up to 799, the highest level since April 2015, Baker Hughes energy services firm said on Friday.

Hedge funds and money managers upped their bullish wagers on U.S. crude oil for the first time in four weeks, data showed on Friday.

A powerful 7.5-magnitude earthquake struck Papua New Guinea’s Southern Highlands province early on Monday, disrupting communications and oil and gas operations.

Meanwhile, Libya’s National Oil Corp said on Saturday it had declared force majeure on the 70,000 bpd El Feel oilfield after a protest by guards closed the field.

Oil gains as dollar sags near 3-year low; many Asian markets shut

CNBC

  • The U.S. crude contract has risen nearly 4 percent this week after losing nearly 10 percent last week.

Oil prices edged higher on Friday as the dollar stood near a three-year low in subdued Asian trade, with many markets closed for the Lunar New Year holiday.
Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

U.S. crude for March delivery was up 16 cents, or 0.3 percent, at $61.50 a barrel by 0200 GMT, after settling up 74 cents on Thursday. For the week, the contract has risen nearly 4 percent after losing nearly 10 percent last week.

Brent crude was up 26 cents, or 0.4 percent, at $64.59 after settling down 3 cents. Brent is up nearly 3 percent for the week after falling more than 8 percent last week.

“Oil is getting support from a rebound in global stock markets and a weak dollar, but the upside is limited due to a projection for rising U.S. production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “The market is quiet due to a slew of holidays in Asia.”

The dollar languished near a three-year low against a basket of currencies on Friday, headed for its biggest weekly loss in two years. A weaker dollar often boosts prices for oil and other dollar-denominated commodities.

Asian shares extended their recovery from two-month lows into a fifth day on Friday as Wall Street’s market volatility gauge fell, although Chinese and most Southeast Asian financial markets were closed for the Lunar New Year holiday.

Here's where oil prices are headed next: Oil analyst

Here’s where oil prices are headed next: Oil analyst  

Oil producers led by Saudi Arabia and Russia aim to draft an agreement on a long-term alliance by the end of this year, United Arab Emiratesenergy minister Suhail al-Mazroui said on Thursday. OPEC and non-OPEC producers including Russia have been restraining production by a total 1.8 million barrels per day in a bid to prop up prices under a deal that is to expire at the end of 2018.

The move comes at a time when Asian demand is on the rise. Indiaimported a record 4.93 million bpd in January to feed its expanded refining capacity and meet rising demand, data showed.

Oil won support earlier in the week after Saudi Energy Minister Khalid al-Falih said OPEC hopes to keep limiting crude output to leave the market tight.

However, surging U.S. production is offsetting OPEC’s efforts to curb supplies. U.S. crude output hit a record 10.27 million barrels per day last week, the Energy Information Administration (EIA) said on Wednesday, making it a bigger producer than Saudi Arabia.

Oil extends gains on Saudi commitment to cutting output, weak dollar

CNBC

  • Oil prices on Thursday extended gains from the previous session.
  • Prices were supported by the weaker dollar and comments from Saudi Arabia over a deal to withhold production.

Getty Images

Oil prices rose more than 1 percent on Thursday to extend gains from the previous session, lifted by a weak dollar and Saudi comments that it would rather see an undersupplied market than end a deal with OPEC and Russia to withhold production.

U.S. West Texas Intermediate (WTI) crude futures were up 84 cents, or 1.4 percent, from their last settlement at $61.44 a barrel at 0604 GMT, adding to a 2.4-percent gain from the day before.

Brent crude futures were at $65.05 per barrel, up 69 cents, or 1.1 percent, extending Wednesday’s 2.6-percent climb.

Prices rose on the back of ongoing weakness in the U.S. dollar against other leading currencies, further supported by rising stock markets, traders said.

A weaker greenback potentially stokes consumption of dollar-denominated commodities as it makes fuel and raw materials cheaper for countries using other currencies.

“On commodity markets, everyone loves a lower U.S. dollar,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

More fundamentally, oil markets got a push from comments by Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), voicing support for output cuts backed by OPEC and other producers including Russia since 2017 in an effort to tighten the market and prop up prices.

“If we have to err on over-balancing the market a little bit, so be it,” Saudi Energy Minister Khalid al-Falih said on Wednesday. “I think we are going to be sticking with our policy (to withhold production) throughout 2018.”

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said “the Saudi signal is reasonably convincing, suggesting OPEC and their partners are committed to maintaining an absolute floor on oil prices”.

Threatening to undermine the OPEC-led effort to tighten markets is soaring production in the United States, which is not participating in the pact to cut.

U.S. crude oil production rose to a fresh record of 10.27 million barrels per day (bpd), more than top exporter Saudi Arabia pumps and within reach of No.1 producer Russia.

Consequently, U.S. crude inventories rose by 1.8 million barrels in the week to Feb. 9, to 422.1 million barrels, the Energy Information Administration said on Wednesday.

“Although we remain positive on crude oil prices until year-end, an interim correction into 1Q18 cannot be ruled out,” said Barnabas Gan, economist at OCBC Bank in Singapore.

Here's where oil prices are headed next: Oil analyst

Here’s where oil prices are headed next: Oil analyst  

‘Relentless’ growth could see the US topple Russia, Saudi Arabia as world’s largest oil producer, IEA says

CNBC

  • “This year promises to be a record-setting one for the U.S.,” the IEA said in its closely-watched report published Friday
  • The latest monthly report from the IEA comes at a time when crude futures have climbed to highs not seen since the early days of a slump in December 2014
  • One of the main beneficiaries of OPEC-led production cuts is the producers’ major competitor, U.S. shale oil. U.S. oil producers are staging a dramatic comeback amid a recovering oil price that has allowed many of them to restart operations.

IEA’s Atkinson: Low Venezuelan oil production hastens market rebalancing

IEA: Expect a volatile year for oil prices  

The U.S. is well-placed to overtake the likes of Saudi Arabia and Russiaas the world’s leading energy producer over the next 12 months, according to the latest monthly report from the International Energy Agency (IEA).

“This year promises to be a record-setting one for the U.S.,” the IEA said in its closely-watched report published Friday.

“Relentless growth should see the U.S. hit historic highs above 10 million barrels a day (in production), overtaking Saudi Arabia and rivaling Russia during the course of 2018 — provided OPEC and non-OPEC restraints remain in place,” the Paris-based organization added.

‘Unchartered waters’

The latest monthly report from the IEA comes at a time when crude futures have climbed to highs not seen since the early days of a slump in December 2014. Brent crude futures hit a peak of $70.37 a barrel on Monday, with the global benchmark since paring some of its recent gains to trade at $68.69 on Friday morning.

“What we are trying to understand is the responsiveness of the U.S. shale producers. And because of the dynamism of the industry, the innovation and the vast number of players in that space … to some extent, we are in unchartered waters,” Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC on Friday.

Atkinson said that given the recent rally in oil prices, the IEA was expecting a “wave of new production” from the U.S. in the coming months. He added OPEC would then need to “accommodate” for that and make its own judgment at its next meeting in June as to what its response should be.

IEA predicts a slowdown in crude demand growth in 2018

IEA’s Atkinson: Low Venezuelan oil production hastens market rebalancing  

The main price driver has been a supply cut from major oil producing group OPEC and Russia, who started to withhold output in January last year. The production cuts by OPEC and 10 other allied producers, which are scheduled to last throughout 2018, are aimed at clearing a supply overhang and propping up prices.

One of the main beneficiaries of these cuts is the producers’ major competitor, U.S. shale oil. U.S. oil producers are staging a dramatic comeback amid a recovering oil price that has allowed many of them to restart operations.

US ‘beat all expectations’ in 2017

U.S. crude production stands at 9.9 million barrels a day, according to the IEA, which is the country’s highest level in almost 50 years. That level of supply puts the U.S. neck-and-neck with OPEC kingpin Saudi Arabia — the world’s second-largest producer after Russia.

“The stage was set for a strong expansion last year, when non-OPEC supply, led by the U.S., returned to growth of 0.7 million barrels a day and pushed up world production despite OPEC and non-OPEC cuts,” the IEA said.

“U.S. growth of 0.6 million barrels a day in 2017 beat all expectations, even with a moderate price response to the output deal as the shale industry bounced back — profiting from cost cuts, stepped up drilling activity and efficiency measures enforced during the downturn,” the group said.

A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

Brittany Sowacke | Bloomberg | Getty Images
A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

In recent years, America’s unprecedented oil and gas boom has been driven by one factor above all others — and that’s shale. The so-called shale revolution could help to alleviate Washington’s reliance on foreign oil, including from turbulent Middle Eastern states, while also supporting a bid to export to more countries around the world.

The IEA’s estimates of global oil product demand in 2017 and 2018 were left roughly unchanged at 97.8 million barrels a day and 99.1 million barrels a day, respectively.

The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.

Oil prices are spiking toward 2½-year highs after OPEC extends output cuts

CNBC

  • Oil prices spike toward 2½-year highs.
  • The surge follows a decision on Thursday by two dozen oil-producing nations to limit their output through the end of 2018.
  • Analysts say the market was keying in on the resolve of Saudi Oil Minister and OPEC President Khalid al-Falih to push the deal over the finish line.
Saudi Arabia's Oil Minister Khalid al-Falih listens during a news conference after an OPEC meeting in Vienna, Austria, November 30, 2017.

Heinz-Peter Bader | Reuters
Saudi Arabia’s Oil Minister Khalid al-Falih listens during a news conference after an OPEC meeting in Vienna, Austria, November 30, 2017.

Oil prices spiked higher on Friday, heading toward 2½-year highs the morning after two dozen crude-producing nations agreed to limit their output through the end of 2018.

U.S. West Texas Intermediate crude prices rocketed up 98 cents per barrel, or 1.7 percent, to $58.38 by 11:15 a.m. ET. That put the contract within striking distance of $59.05, its peak for this year and the highest level since July 2015.

International benchmark Brent crude surged $1.11, or 1.8 percent, to $63.74, not far off last month’s high of $64.65 that marked the best intraday level since June 2015.

“Prices have been supported in the aftermath of the OPEC meeting,” said John Kilduff, partner at energy hedge fund Again Capital told CNBC.

U.S. crude intraday

Futures spiked higher around 9 a.m. ET, the technical start of the trading day when many big firms start putting in buy and sell orders. Kilduff said the market appeared to be keying in on Saudi Oil Minister and current OPEC President Khalid al-Falih’s resolve in securing a deal among the 24 producers who met in Vienna on Thursday.

“The market is giving a tip of the hat to him right now,” he said.

The 14-member OPEC cartel, Russia and nine other producers agreed on Thursday to extend their deal to keep 1.8 million barrels a day off the market through the end of 2018. The producers reached the agreement last winter in a bid to drain a global crude glut and boost prices. They had extended the agreement once already.

Analysts earlier this week told CNBC they expected oil prices to falleven if the producers delivered the nine-month extension the market had been anticipating. That is because the extension was largely baked into prices.

But Falih exceeded expectations by securing output limits from Nigeria and Libya’s cooperation, two OPEC members that have so far been exempt from the deal, according to Helima Croft, global head of commodity strategy at RBC Capital Markets.

“Throughout the year he earned a reputation as a tough compliance enforcer,” she told CNBC on Thursday.

Prices had slumped throughout much of the week as questions over Russia’s commitment to a full nine-month extension sent jitters through the market.