Oil rebounds from 18-year lows after US, Russia agree to talks

CNBC

Reuters
KEY POINTS
  • Brent crude was up by 43 cents, or 1.9%, at $23.19 a barrel by 0406 GMT, after closing on Monday at $22.76, its lowest finish since November 2002.
  • U.S. crude was up by $1.16, or 5.8%, at $21.26 a barrel, after settling in the earlier session at $20.09, lowest since February 2002.
GP: Oil Pumping Jacks
Oil pumping jacks, also known as “nodding donkeys”, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil recovered ground on Tuesday after U.S. President Donald Trump and Russian President Vladimir Putin agreed to talks to stabilize energy markets, with benchmarks climbing off 18-year lows hit as the coronavirus outbreak cut fuel demand worldwide.

Brent crude was up by 43 cents, or 1.9%, at $23.19 a barrel by 0406 GMT, after closing on Monday at $22.76, its lowest finish since November 2002.

U.S. crude was up by $1.16, or 5.8%, at $21.26 a barrel, after settling in the earlier session at $20.09, lowest since February 2002.

Oil markets have faced a double whammy from the coronavirus outbreak and a price war between Saudi Arabia and Russia after OPEC and other producers failed to agree on deeper cuts to support oil prices in early March.

Trump and Putin agreed during a phone call to have their top energy officials discuss stabilizing oil markets, the Kremlin said on Monday.

“Oil prices are clawing back from a near 18-year low on hopes that oversupply concerns may finally see some relief,” said Edward Moya, senior market analyst at broker OANDA.

“Much of the focus has fallen on a key call between the Presidents of the United States and Russia.”

With a plunge in prices that has knocked around 60% off oil this year, a commissioner with the Texas state energy regulator renewed his call for restrictions on crude production because of the national supply glut.

In a sign of how well the market is supplied, the front-month Brent futures contract for May, is currently at a discount of $13.95 per barrel to the November contract, the widest contango spread ever seen.

A contango market implies traders expect oil to be higher in the future, prompting them to store oil for later sales.

Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), plans to boost its oil exports to 10.6 million barrels per day (bpd) from May on lower domestic consumption, a Saudi energy ministry official said.

Global oil refiners, meanwhile, have cut their throughput because of the slump in demand for transportation fuel, with European refineries slashing output by at least 1.3 million bpd, sources told Reuters.

UBS estimated global oil demand to fall by 1.2 million bpd, or 1.2%, over the whole of 2020, weighed down by the coronavirus pandemic, the Swiss bank said in a note.

Others, including the chief economist for global commodities trader Trafigura, have said that oil demand could fall as much as 30% from the end of last year over coming weeks.

Oil prices fall to 17-year low as Saudi Arabia-Russia standoff continues, coronavirus hits demand

KEY POINTS
  • Saudi Arabia signaled no breakthrough in the oil price war with Russia, saying it was not in talks with Russia to stabilize the oil market despite Washington pressuring both sides to end the price war.
  • In early March, OPEC and non-OPEC allies, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts.
  • Countries have gone into lockdown due to the coronavirus pandemic, with flights all over the world canceled as airlines ground their planes, hitting economic activity and fuel demand.
Saudi Aramco oil processing facility in Saudi Arabia
A worker at an oil processing facility of Saudi Aramco, a Saudi Arabian state-owned oil and gas company, at the Abqaiq oil field.
Stanislav Krasilnikov | TASS | Getty Images

Oil prices fell to the lowest in more than 17 years as demand plunged as a result of the pandemic and an unrelenting price war between Saudi Arabia and Russia showed no signs of easing.

Brent crude prices hit $23.03 a barrel on Monday morning during Asia hours – the lowest level since Nov. 15, 2002. It has since clawed back some losses following that record decline, but was last still 5.86% lower at $23.47 a barrel.

U.S. West Texas Intermediate (WTI) crude futures briefly dipped below $20 per barrel to $19.90 – their lowest level since March 20, when they fell as low as $19.50. WTI was last 4.51% lower at $20.54 per barrel.

Those declines come as Saudi Arabia signaled no breakthrough in the oil price war with Russia. On Friday, the two countries were still at a stalemate, with Saudi Arabia saying it was not in talks with Russia to stabilize oil markets despite Washington stepping in to pressure both sides to end the price war.

“Russia and Saudi Arabia show no signs of compromising in their standoff over oil supply,” National Australia Bank’s Rodrigo Catril wrote in a Monday note.

In early March, OPEC and non-OPEC allies, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts.

The fallout between OPEC kingpin Saudi Arabia and non-OPEC leader Russia has kickstarted an oil price war. OPEC recommended additional production cuts of 1.5 million bpd starting in April and extending until the end of the year, but OPEC-ally Russia rejected the additional cuts.

Saudi Arabia has signaled its intent to flood the market with crude, announcing massive discounts to its official selling prices for April, Reuters reported.

Such a move could prompt a wave of bankruptcies and investment cuts in the U.S. which, in turn, would have a noticeable impact on shale production.

“We think oil supply from the US, Canada and China are the most likely to be curtailed at low oil prices. US oil production cuts are expected to be the most significant,” Vivek Dhar of the Commonwealth Bank of Australia said in a note on Monday. “The plunge in US oil rigs last week signals the pressure facing the US shale oil sector.”

Countries have gone into lockdown due to the coronavirus pandemic, with flights all over the world canceled as airlines ground their planes, hitting economic activity and fuel demand. That has led to excess supply flooding the market as well.

With 3 billion people in lockdown, global oil requirements could drop by 20%, International Energy Agency head Fatih Birol said, according to a Reuters report on Friday.

“The world is facing a hugely deflationary shock. The WTI oil price has dropped from USD60 in January to around USD20. Demand for many goods has plummeted, as economic activity has gone into stasis,” ANZ Research’s Kishti Sen said in a Monday note.

“The deepening pandemic and reduced appetite for crude oil by refiners sent the oil price into a tailspin,” he added, saying the quarterly and monthly price declines have been “the steepest in history.”

“Amid the worldwide lockdowns, storage capacity is filling fast and may soon run out unless there is an urgent supply cut.”

— CNBC’s Sam Meredith and Reuters contributed to this report.

Oil gains as governments pledge support amid coronavirus chaos

CNBC

Reuters
KEY POINTS
  • Brent crude was up 22 cents, or 0.8%, at $26.56 a barrel by 0415 GMT.
  • U.S. crude was up 42 cents, or 1.9%, at $23.02.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Oil prices rose on Friday as governments around the world pledged a huge injection of funds and other measures to limit the economic fallout from the coronavirus pandemic, despite fears the outbreak will destroy demand for oil.

Brent crude was up 22 cents, or 0.8%, at $26.56 a barrel by 0415 GMT. U.S. crude was up 42 cents, or 1.9%, at $23.02.

Both of the benchmarks are down nearly two-thirds this year and the slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies.

Oil requirements around the world may drop by 20% as 3 billion people are in lockdown, the head of the International Energy Agency said as he called on major producers like Saudi Arabia to help stabilize oil markets. [nL8N2BJ8BB]

“It’s going to be a very uncertain year for us from a price point of view,” Peter Coleman, the head of Australian oil and gas developer Woodside Petroleum told investors on a conference call on Friday.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.”

The United States has now passed China and Italy as the country with the most coronavirus cases, according to a Reuters tally, as the country faced a surge in hospitalizations and looming shortages in supplies, staff and sick beds.

“The U.S. is the most consequential oil demand region in the world and real-time GPS data suggests an 82% drop in congestion in major U.S. cities”, Capital Economics said in a note.

“Ultimately, U.S. consumption has to lead the way for meaningful global oil demand recovery,” it said.

Still, the availability of funds helped oil prices gain as other markets rose while more governments roll out additional stimulus measures to combat the pandemic.

Oil prices mixed as demand shrinks, but stimulus hopes support

CNBC

Reuters
KEY POINTS
  • West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT.
  • Brent crude futures rose 12 cents, or 0.4%, to $27.51.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were mixed on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.

West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT, while Brent crude futures rose 12 cents, or 0.4%, to $27.51.

“With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note.

The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

“Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said.

U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.

Oil extends gains after Trump hints at intervening in Saudi-Russia price war

CNBC

Reuters
KEY POINTS
  • U.S. crude futures for April rose 92 cents, or 3.7% to $26.14 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.
  • Brent crude futures climbed 57 cents, or 2%, to $29.04 per barrel. Brent rose 14.4% on Thursday in its biggest one-day gain since September.
GP: US Pumpjack at Dusk in the Permian Basin
Silhouette of Permian Basin pumpjacks taken at dusk, north of Midland, Texas, U.S. in late 2019.
Richard Eden | via Getty Images

U.S. crude oil prices rose over $1 on Friday, extending steep gains from the previous session, after U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an “appropriate time”.

Prices were also supported by United States’ plans to buy oil for its emergency stockpile, while regulators in the country’s largest oil-producing state Texas were reportedly considering curtailing production.

“Such actions, if implemented, would reduce global and domestic supplies and help support prices in the near-term,” Goldman Sachs said in a note on Friday.

“While this support could prove lasting in 2H20, the accompanying supply cuts would however remain much too small to offset the current 8 million barrels per day hit on demand from the coronavirus…”

The more active West Texas Intermediate (WTI) crude futures contract for May was up $1.01, or 3.9% at $26.92 a barrel by 0352 GMT.

U.S. crude futures for April rose 92 cents, or 3.7% to $26.14 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.

Brent crude futures climbed 57 cents, or 2%, to $29.04 per barrel. Brent rose 14.4% on Thursday in its biggest one-day gain since September.

U.S. crude and Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down, which led Saudi Arabia to ramp up supply.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.

“A fair bit of short covering ensued after President Trump suggested he may tackle the oil crisis by brokering a deal between Moscow and Riyadh,” Stephen Innes, chief market strategist at AxiCorp, said in a note.

U.S. crude prices were also supported by the country’s plans to buy crude for stockpiling after the U.S. Department of Energy said it would buy up to 30 million barrels of crude oil for the Strategic Petroleum Reserve by the end of June.

“Buying oil for the strategic reserve is a very constructive measure to help some U.S. producers avoid collapse amid the international price war,” said Per Magnus Nysveen, head of analysis at Oslo-based energy research firm Rystad Energy.