Oil prices ease on scant details of US-China trade deal

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Reuters
KEY POINTS
  • Oil prices eased on Monday as scant details on the first phase of a trade deal between the United States and China undercut last week’s optimism over the thaw that helped to lift crude markets by 2%.
  • Brent crude futures edged down by 25 cents to $60.26 a barrel by 0436 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures was at $54.45 a barrel, down 25 cents.
GP: US Oil workers Oil Boom in Texas's Permian Basin 191014
Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
Benjamin Lowy | Getty Images

Oil prices eased on Monday as scant details on the first phase of a trade deal between the United States and China undercut last week’s optimism over the thaw that helped to lift crude markets by 2%.

Brent crude futures edged down by 25 cents to $60.26 a barrel by 0436 GMT, while U.S. West Texas Intermediate (WTI) crude futures was at $54.45 a barrel, down 25 cents.

Both contracts rose more than 3% last week, their first weekly gain in three.

“There is an argument that the oil market trading during U.S. hours on Friday have already had a chance to price (in) the news on the trade dispute and the better outlook for global demand,” said CMC Markets chief strategist Michael McCarthy.

“So traders are reluctant to push it further given those very strong gains.”

Most of the gains posted on Friday, however, had come after an Iranian oil tanker was attacked off Saudi Arabia’s coast in the Red Sea. Investigations are under way to determine if the tanker was hit by missiles, which could ratchet up tensions between Tehran and Riyadh if confirmed.

The emergence of a “phase 1” trade deal between the United States and China and a goodwill move by Washington to suspend threatened tariffs on Chinese products also helped to lifted global financial markets on Monday.

But investors remained cautious given that few details emerged from the talks.

“Traders view the deal in a tentative light … This baby-step agreement could take weeks to iron out,” said Stephen Innes, Asia Pacific market strategist at AxiTrader in a note.

The trade war has pressured China’s trade, with its exports to the United States falling 10.7% from a year earlier in dollar terms over January-September, Chinese customs spokesman Li Kuiwen told reporters.

China’s imports from the United States, on the other hand, have fallen 26.4% in dollar terms during the first nine months.

China’s demand for oil remains strong, however, with its September imports reflecting a 10.8% rise from a year earlier as refiners ramped up output amid stable profit margins and solid fuel demand.

Oil prices on ebb tide as gloom gathers over global economy

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Reuters
KEY POINTS
  • Brent crude futures edged down 28 cents to $58.09 a barrel by 0300 GMT.
  • U.S. West Texas Intermediate (WTI) crude was at $52.64, down 17 cents.
GP: Iran Salman Oil Field 190422
Workers cross walkways between zones aboard an offshore oil platform in the Persian Gulf’s Salman Oil Field, near Lavan island, Iran, on Jan. 5. 2017.
Ali Mohammadi | Bloomberg | Getty Images

Oil prices fell on Monday, extending last week’s heavy losses, with traders fearing the global economic slowdown will weigh on future oil demand growth while pegging hopes for a rebound on progress in talks this week on ending the U.S.-China trade war.

Brent crude futures edged down 28 cents to $58.09 a barrel by 0300 GMT, while U.S. West Texas Intermediate (WTI) crude was at $52.64, down 17 cents.

Both contracts ended last week with a more-than-5% decline after dismal manufacturing data from the United States and China, as the lingering row between the world’s top economies hurts global growth and raises the risk of recession.

U.S. and Chinese officials will meet in Washington on Oct. 10-11 in the next, much-anticipated fresh effort to work out a deal.

On the supply side, a faster-than-expected resumption in Saudi Arabia’s production after a Sept. 14 attack on key production facilities also exerted downward pressure on oil prices, although the Middle East remained tense.

“The macro headwinds outweigh supply concerns for oil now, despite tensions in the Middle East and a reduced spare capacity pillow,” said Stephen Innes, Asia Pacific market strategist at AxiCorp.

In Iraq, the second-largest producer among the Organization of the Petroleum Exporting Countries, deadly anti-government unrest is posing the biggest security and political challenge so far to Prime Minister Adel Abdul Mahdi’s year-old government.

Iraq’s oil exports of 3.43 million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group’s practice head for Middle East and North Africa, said in a note.

“Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies (spare capacity),” he said.

“While Saudi oil production is now close to 9.9 million bpd, it is not clear that the capacity is fully operational at 11.3 million bpd and the (attacked) Abqaiq facility has lost a significant part of its redundancy.”

Global supply also faces facility repair and maintenance pressures.

The Buzzard oil field in the British North Sea has been shut for pipe repair work, a spokesman from China’s CNOOC said on Friday. Buzzard is the main contributor to the Forties crude stream, the largest of the five North Sea oil grades that underpin Brent crude futures.

Meanwhile Libya’s National Oil Corporation (NOC) said on Sunday it will close the Faregh oil field at Zueitina port for scheduled maintenance from Monday until Oct. 14.

Oil climbs but still set for big weekly loss over demand worries

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Reuters
KEY POINTS
  • Brent crude oil futures rose 28 cents, or 0.5%, to $57.99 a barrel by 0450 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.6%, to $52.74.
GP: Tullow Oil 190812 EU
The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
Nicky Loh | Bloomberg | Getty Images

Oil futures were higher ahead of the weekend but remained on track for large weekly losses on fears that slower global economic growth will hurt fuel demand, even as Saudi Arabia said it has fully restored oil output after recent attacks.

Brent crude oil futures rose 28 cents, or 0.5%, to $57.99 a barrel by 0450 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.6%, to $52.74.

“Asia will probably see some buying emerge over the session as traders hedge potential weekend geopolitical risk, although the session should be quiet with China still on holiday,” said Jeffrey Halley, a senior market analyst at OANDA in Singapore.

For the week, Brent futures were down 6.3%, marking its largest weekly loss since July. WTI was down 5.7% for the week, also its biggest decline since July.

“The recovery from the initial sell-off looked more a case of hope rather than reality,” said Halley.

Weak U.S. services sector and jobs growth data on Thursday added to worries about global oil demand and exacerbated fears that a protracted U.S.-China trade war could push the global economy into a recession.

“Concerns about global oil demand are rising, and next week’s U.S.-China trade talks, the significant X factor, will be particularly important, given the sharp drop in the oil price over the last week,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, also said on Thursday the world’s top crude oil exporter has fully restored oil output after attacks on its facilities last month knocked out more than 5% of global oil supply.

“The mood wasn’t helped by news that Saudi Arabia has managed a speedy recovery from the recent attacks,” ANZ Bank said in a note on Friday.

Recent data showing a slowdown in U.S. shale output and drilling activity, however, could lend some support.

“Continued falls in drilling activity has seen monthly growth in U.S. shale oil output fall, from 150 thousand barrels per day (kbpd) to only 50 kbpd,” said ANZ.

“This is likely to linger well into 2020.”

Oil steadies in rebound after jitters over economic outlook, US inventories

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Reuters
KEY POINTS
  • Brent crude oil futures edged 10 cents higher, or 0.2%, to $57.79 a barrel by 0209 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 23 cents, or 0.4%, to $52.87 a barrel.
GP: Sinopec oil China 190322
A man working in a filling station of Sinopec, China Petroleum and Chemical Corporation, in Shanghai, China, on March 22, 2018.
Johannes EIsele | AFP | Getty Images

Oil futures rebounded on Thursday, reversing losses earlier in the day, as fears over the worsening global economic outlook that hit prices hard in the previous session gave way to modest hopes for progress in resolving the U.S.-China trade war.

Brent crude oil futures edged 10 cents higher, or 0.2%, to $57.79 a barrel by 0209 GMT, after tumbling 2% in the previous session.

U.S. West Texas Intermediate (WTI) crude futures were up 23 cents, or 0.4%, to $52.87 a barrel, after sinking by 1.8% on Wednesday.

“What’s impossible to ignore is the economic realities being signalled in the latest run of doom and gloom financial market data which offers few if any reason for oil investors to be optimistic over the outlook for global demand,” said Stephen Innes, market strategist, SPI Asset Management.

World equity benchmarks hit their lowest levels in a month on Wednesday as signs of a slowdown in U.S. economic growth and weak earnings in Europe fanned fears the global economy could slip into recession.

Still, Wednesday’s slide to near two-month oil price lows proved an attractive enough buying opportunity for some.

“While the near-term triggers may continue to relate to oil demand, next week U.S.-China trade talks remain the unknown variable which could lend a modicum of support,” said Innes.

Also hurting sentiment in the previous session was U.S. crude inventories rising 3.1 million barrels last week, according to the country’s Energy Information Administration, far exceeding analyst expectations for an increase of 1.6 million barrels.

Brent futures are now well below levels seen before the Sept. 14 attacks on Saudi Arabia oil facilities that briefly halved more than half the kingdom’s output.

“The market is clearly fixated on the potential impact of weak economic growth on oil demand, with supply side issues taking a back seat for the moment,” said ANZ.

Oil sinks on weak China data, fading Saudi supply concerns

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Reuters
KEY POINTS
  • Brent crude futures fell 49 cents, or 0.8%, from the previous session’s close to $62.25 a barrel by 0603 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $56.18 a barrel.
GP: Saudi Arabia oil processing plant damaged 190920
A damaged installation in Saudi Arabia’s Abqaiq oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices fell on Friday after fresh Chinese economic data revived concerns of slowing economic growth, and while a faster-than-expected recovery in Saudi crude oil output this week eased concerns of major supply disruptions.

“Oil prices continued to slide lower after a drop in China’s industrial profits in August reinforced worries that the world’s second-largest economy continues to decelerate,” said Edward Moya, senior market analyst at OANDA.

Chinese industrial firms reported a contraction in profits in August, reversing the previous month’s brief expansion, as weak domestic demand and a trade war with the United States weighed on corporate balance sheets.

Brent crude futures fell 49 cents, or 0.8%, from the previous session’s close to $62.25 a barrel by 0603 GMT.

U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $56.18 a barrel.

The rapid return of oil production from top world exporter Saudi Arabia less than two weeks after the Sept. 14 attacks also squashed risk premiums and dragged crude prices lower, analysts said.

“For most of the week … the market has been trading lower as oil bulls have been discouraged by the quicker-than-expected return of Saudi oil output,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

WTI futures were down 3.3% so far for the week, marking the largest weekly loss in 10 weeks, while Brent was down 3.2% on the week, its largest weekly loss in seven.

A surprise 2.4 million-barrel build in U.S. crude inventories last week also weighed on prices.

U.S. inventories may rise further over the near term, further pressuring prices, as American refiners curb runs for maintenance, analysts said.

“The expected lower demand for oil inputs into (U.S.) refineries typically sees U.S. crude inventories swell, all of which could pose a significant downside risk for prompt oil prices,” Innes said.

Emerging details connected to the impeachment inquiry into U.S. President Donald Trump also helped dent demand sentiment, analysts said.

“Trump’s impeachment inquiry also raises uncertainty surrounding his foreign policy,” said Margaret Yang Yan, a market analyst at CMC Markets, particularly on Iran and China.

“The market is assessing how this political turbulence may affect his ability and position to impose further sanctions on Iran, which will have significant impact on global oil supply.”