Oil prices rise as Saudi Arabia cuts supply to United States

CNBC

  • Both U.S. crude futures and international Brent futures saw gains.
  • The price rise came after a report from the U.S. Energy Information Administration (EIA) on Wednesday showed a drop in Saudi crude supply to the United States.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Oil prices rose for a third day on Thursday, pushed up by signs of lower imports into the United States as part of efforts by OPEC to tighten the market.

U.S. West Texas Intermediate (WTI) crude futures were at $54.58 per barrel at 0249 GMT, up 35 cents, or 0.7 percent, from their last settlement. WTI closed up 1.7 percent on Wednesday, when prices touched their highest since Nov. 21 at $54.93 a barrel.

International Brent crude oil futures were up 52 cents, or 0.8 percent, at $62.17 per barrel.

The price rise came after a report from the U.S. Energy Information Administration (EIA) on Wednesday showed a drop in Saudi crude supply to the United States.

“Crude oil prices were stronger after signs emerged that OPEC cuts are impacting trade. EIA’s weekly report showed that U.S. imports from Saudi Arabia fell by more than half from the previous week to 442,000 barrels per day (bpd). This is the second lowest level in weekly data going back to 2010,” ANZ bank said.

Saudi Arabia is the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-OPEC producers, including Russia, announced supply cuts late last year aimed at tightening the market and propping up prices.

Despite these efforts, oil remains in ample supply, not least because of soaring U.S. crude oil production, which jumped by more than 2 million bpd last year to a record 11.9 million bpd.

This shows in high U.S. commercial crude oil stockpiles, which rose by 919,000 barrels in the week to Jan. 25, to 445.94 million barrels, EIA data showed. Stockpiles are 6.6 percent higher than a year ago.

Oil firms as China’s economic slowdown was not as big as some expected

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  • Both Brent and U.S. crude futures saw gains.
  • In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and down from a revised 6.8 percent in 2017, official data showed on Monday.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices firmed on Monday after data showed China’s economic slowdown was not as big as some analysts had expected, with supply cuts led by the Organization of the Petroleum Exporting Countries also offering support.

International Brent crude oil futures were at $62.83 per barrel at 0259, up 13 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $53.92 a barrel, up 12 cents, or 0.2 percent.

Both oil price benchmarks had dipped into the red earlier in the session on fears that China’s 2018 economic growth figures would be weaker.

In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and down from a revised 6.8 percent in 2017, official data showed on Monday. China’s September-December 2018 growth was at 6.4 percent, down from 6.5 percent in the previous quarter.

Although the slowdown was in line with expectations and not as sharp as some analysts had expected, the cooling of the world’s number two economy casts a shadow over global growth.

“The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting U.S. mortgage applications), faster China easing (China credit growth stabilizing) and a more durable U.S.-China truce,” U.S. bank J.P. Morgan said in a note.

Despite this, analysts said supply cuts led by OPEC would likely support crude oil prices.

“Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower U.S. output growth,” J.P. Morgan said.

It recommended investors should “stay long” crude oil.

Researchers at Bernstein Energy said the supply cuts led by OPEC “will move the market back into supply deficit” for most of 2019 and that “this should allow oil prices to rise to U.S. $70 per barrel before year-end from current levels of U.S.$60 per barrel.”

In the United States, energy firms cut 21 oil rigs in the week to Jan. 18, taking the total count down to 852, the lowest since May 2018, energy services firm Baker Hughes said in a weekly report on Friday.

It was biggest decline since February 2016, as drillers reacted to the 40 percent plunge in U.S. crude prices late last year.

However, U.S. crude oil production still rose by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd.

With the rig count stalling, last year’s growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Brent crude edges up, but concern over demand limits gains

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  • Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent so far this quarter.
  • The price drop has caused U.S. shale oil producers to curtail drilling plans for next year.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices edged up on Monday after evidence that a recent fall to 15-month lows may be affecting output in the United States, the world’s largest producer, although concern about the outlook for demand tempered gains.

Brent crude futures were up 12 cents at $53.94 a barrel by 0858 GMT, while U.S. crude futures lost 3 cents to $45.56.

Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent so far this quarter.

The price drop has caused U.S. shale oil producers to curtail drilling plans for next year.

The boom in shale output has made the United States the world’s largest oil producer, overtaking Saudi Arabia and Russia.

Physical prices for Brent have also fallen in the last six weeks, driven by a drop in demand from Chinese refiners in particular, which has weighed on the value of barrels of anything from North Sea to Nigerian crude.

“The recent weakness in the physical Brent structure can be attributed to a broader easing of purchases by Asian refiners at this point, with lower end-Q1 intake weighing on spot assessments, and we can expect this pressure to carry through over the coming weeks,” consultancy JBC Energy said in a report.

Still, the macroeconomic picture and its impact on oil demand continue to pressure prices. Global equities have fallen nearly 9.5 percent so far in December, their biggest one-month slide since September 2011, when the euro zone debt crisis was unfolding.

The trade dispute between the United States and China and the prospect of a rapid rise in U.S. interest rates have brought global stocks down from this year’s record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day from January.

Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.

“Oil ministers are already taking to the airwaves with a ‘price stability at all cost’ mantra,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Oil prices rebound on hints of stabilization in markets

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  • U.S. crude oil had climbed 37 cents, or 0.8 percent, to $46.24 per barrel by 0122 GMT, after plunging 7.3 percent the day before in a session when it touched its lowest since August last year at $45.79.
  • Global benchmark Brent was up 0.85 percent, or 49 cents, at $56.75 per barrel. It dropped 5.62 percent on Tuesday, at one point marking a 14-month low of $56.16 a barrel.

Oil prices rebounded on Wednesday after falling for the past three sessions with worries about oversupply and a slowing global economy keeping markets under pressure though sentiment may be shifting as falling equity markets seemed to stabilize.

West Texas Intermediate futures (WTI) climbed 4 cents cents, or 0.09 percent, to $46.28 per barrel by 0443 GMT, after plunging 7.3 percent the day before in a session when it touched its lowest since August 2017.

Global benchmark Brent crude futures rose 0.4 percent, or 23 cents, at $56.49 per barrel. It dropped 5.6 percent on Tuesday, at one point hitting a 14-month low.

WTI prices are holding as “traders look for some solace in U.S. equity markets as risk sentiment appears to be stabilising,” said Stephen Innes, head of trading for Asia-Pacific at OANDA.

“But we are far removed from any bullish flip in investor sentiment.”

The S&P 500 ended up slightly on Tuesday and the Dow Jones Industrial Average rose 0.35 percent as both indices ended losing streaks.

Further adding to the oversupply concerns, the American Petroleum Institute said on Tuesday U.S. crude stocks rose unexpectedly last week, while gasoline inventories increased.

If the build in crude stockpiles is confirmed by U.S. government data Wednesday, it will be the first increase in three weeks.

Meanwhile, analysts said that upcoming output cuts led by the Organization of the Petroleum Exporting Countries (OPEC) had so far failed to stimulate the market as they were not due to kick in until next month.

Output from de facto OPEC leader Saudi Arabia as well as the United States and Russia — leading producers outside the group — has been at or near record highs.

The U.S. government said shale production is expected to climb to over 8 million barrels per day (bpd) for the first time by the end of December.

Russian oil output is so far this month at a record 11.42 million bpd, an industry source told Reuters.

However, there were some factors tightening supply, with Libya’s state oil company declaring force majeure at the country’s largest oilfield.

That came a week after the firm announced a contractual waiver on exports from the field following its seizure by protesters.

Elsewhere, a speech marking 40 years of market liberalization by Chinese President Xi Jinping offered no specific support measures for the second-largest economy, disappointing investors who were expecting fiscal policy loosening and a tax cut.

China’s Shanghai crude futures fell 5.8 percent to trade at 389.4 yuan ($56.53)per barrel on Wednesday, the lowest since their launch in March.

Oil market investors were also turning their attention to the outcome of a two-day meeting of the U.S. Federal Reserve that is due to end on Wednesday.

The Fed is expected to raise U.S. interest rates for the fourth time this year though the central bank may temper the outlook for further increases in 2019 due to concerns about the economy.

Oil prices dip as stock markets slide, but trading tepid ahead of OPEC meeting

CNBC

  • OPEC is set to in Vienna, Austria, later on Thursday to decide its production policy.
  • Since early October, crude oil has lost around 30 percent of its value amid surging supply and concerns that an economic downturn will erode fuel demand.

Oil prices fell along with weak stock markets on Thursday, but trading was tepid ahead of a meeting by producer group OPEC that is expected to result in a supply cut aimed at draining a glut that has pulled down crude prices by 30 percent since October.

International Brent crude oil futures were at $61.04 per barrel at 0531 GMT, down 52 cents, or 0.8 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.38 per barrel, down 51 cents, or 1 percent.

Traders said oil prices were being weighed down by weak global financial markets, which saw stock markets tumble on Thursday.

Since early October, crude oil has lost around 30 percent of its value amid surging supply and fears that an economic downturn will erode fuel demand.

“A massive liquidation in long positions by money managers has dampened market confidence on oil prices considerably,” said Benjamin Lu of Singaporean brokerage Phillip Futures.

The Organisation of the Petroleum Exporting Countries (OPEC) is meeting at its headquarters in Vienna, Austria, on Thursday to decide its production policy.

Led by Saudi Arabia, OPEC’s crude oil production has risen by 4.1 percent since mid-2018, to 33.31 million barrels per day (bpd).

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by a 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption.

The increase alone is equivalent to the output of major OPEC producer United Arab Emirates.

Russia, a major oil producer but not a member of OPEC, will meet with the producer cartel on Friday to discuss production levels, and it is widely expected that a supply cut will be agreed.

“Markets…believe the production cut deal will be in range of 1-1.3 million bpd,” ANZ bank said on Thursday.