Crude oil is getting crushed, but one expert sees year-end rally

CNBC

Oil expert sees oil heading higher after a volatile week for crude

Oil expert sees oil heading higher after a volatile week for crude  

Crude oil just posted its worst week since July as a surging dollar, slowing emerging markets and supply concerns have all weighed on the commodity. But despite the price declines, one commodities trader sees a rally in the cards.

Bill Baruch, president of Blue Line Futures, told CNBC’s “Trading Nation” on Thursday what investors can expect next. Here’s what he said.

· A bearish inventory report earlier in the week pushed oil down to its lowest level since June, but crude bulls still have reasons to feel good. For instance, it’s easy to forget crude oil is still trading near multiyear highs, with a gain of 9 percent year to date and 40 percent in the last 12 months.

· One of the biggest stories weighing on crude may be set to dissipate and take some pressure off the commodity: trade tension between the U.S. and China. We may see meaningful headway on trade over the coming weeks, and fears of slowing growth in China may be alleviated.

· My biggest concern, however, is spare capacity. Saudi Arabia promised to ramp up crude production in July, but it actually fell 200,000 barrels per day. Still, the U.S. estimated that production in the lower 48 states has stalled over the last three weeks, and tighter spare capacity can be extremely bullish.

· During this seasonally weak time for crude, investors should look to buy pullbacks; the technical picture should support this strategy. There is tremendous support from $62.50 to $64.50 per barrel, and oil should be positioned to rally back up to between $70 and $80 per barrel later this year. The key level to the downside would be $62.

Bottom line: Despite a 3 percent decline in crude oil this week, Baruch sees the commodity surging into year-end.

Oil prices edge up as Saudi cuts output, but looming demand slowdown drags 

CNBC

  • Oil prices rose on Tuesday after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices rose on Tuesday after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply.

Front-month Brent crude oil futures were at $72.87 per barrel at 0111 GMT, up 26 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $67.52 per barrel.

In July, Saudi Arabia told the producer group of the Organization of the Petroleum Exporting Countries (OPEC) that it had cut production by 200,000 barrels per day (bpd) to 10.288 million bpd.

OPEC’s monthly report published on Monday, which uses data from secondary sources, confirmed the Saudi cut, which traders said triggered crude’s upward move early on Tuesday.

That came despite the Saudi move coming in anticipation of a slowdown in oil demand.

Oil prices down on demand fears amid Turkey crisis

Oil prices down on demand fears amid Turkey crisis  

The OPEC report said it expected world oil demand to grow by 1.43 million bpd in 2019, down from 1.64 million bpd in 2018.

OPEC said the demand slowdown would come on the back of potentially lower economic growth as a result of trade disputes between the United States and China as well as emerging market turmoil.

Despite this, OPEC said overall oil demand would likely remain healthy.

Oil firm as Saudi output dips, Iran sanctions loom

CNBC

  • Oil prices held firm on Monday after Saudi crude production registered a surprising dip in July.
  • American shale drilling appeared to plateau.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices held firm on Monday after Saudi crude production registered a surprising dip in July and as American shale drilling appeared to plateau.

Markets also anticipated an announcement from Washington later on Monday on renewed U.S. sanctions against major oil exporter Iran. So-called “snapback” sanctions are due to be reinstated at 12:01 a.m. EDT on Tuesday, according to a U.S. Treasury official.

Spot Brent crude oil futures were trading at $73.23 per barrel at 0602 GMT on Monday, up 2 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.2 percent, at $68.64 barrel.

U.S. energy companies last week cut oil rigs for a second time in the past three weeks as the rate of growth has slowed over the past couple of months.

Drillers cut two oil rigs in the week to Aug. 3, bringing the total count down to 859, Baker Hughes energy services firm said on Friday.

Many U.S. shale oil drillers posted disappointing quarterly results in recent weeks, hit by rising operating costs, hedging losses and a fall in crude prices away from 2018 highs reached between May and July.

Outside the United States, top crude exporter Saudi Arabia pumped around 10.29 million barrels per day (bpd) of crude in July, two OPEC sources said on Friday, down about 200,000 bpd from a month earlier.

That drop came despite a pledge by the Saudis and top producer Russia in June to raise output from July, with Saudi Arabia pledging a “measurable” supply boost.

U.S. investment bank Jefferies said in a note that “the Saudi and Russian production surges appear to be more limited” than initially expected, adding that bullish market sentiment was also fueled by the imminent reinstatement of U.S. sanctions against Iran.

Still, with Russia, the United States and Saudi Arabia now all producing 10 million to 11 million bpd of crude, just three countries now meet around a third of global oil demand.

Reuters technical commodity analyst Wang Tao said Brent “may test a support at $72.09 per barrel”, a break below which could cause further drops.

Despite the firm prices on Monday, traders said one relief to markets was an announcement by Saudi Arabia over the weekend that oil shipments through the Red Sea shipping lane of Bab al-Mandeb had been resumed

Saudi Arabia halted temporarily oil shipments through the lane on July 25 after attacks on two oil tankers by Yemen’s Iran aligned Houthi movement.

Oil extends decline after biggest monthly slump in two years

CNBC

  • Oil prices fell after industry data showed U.S. stockpiles of crude unexpectedly rose, starting the new month in negative territory after the largest monthly decline in two years in July.

Oil pumps wells Monterey Shale fracking

Getty Images

Oil prices fell on Wednesday after industry data showed U.S. stockpiles of crude unexpectedly rose, starting the new month in negative territory after the largest monthly decline in two years in July.

October Brent crude futures dropped 29 cents, or 0.4 percent, to $73.92 a barrel by 0044 GMT, adding to a 1.8 percent loss in the previous session.

U.S. crude futures were down 44 cents, or 0.6 percent, at $68.32 a barrel, having dropped nearly 2 percent on Tuesday.

Brent fell more than 6 percent in July, while U.S. crude futures slumped about 7 percent, the biggest monthly decline for both benchmarks since July 2016.

Data from the American Petroleum Institute showed domestic crude inventories rose by 5.6 million barrels last week. A Reuters poll had forecast a fall of 2.8 million barrels.

Official data from the U.S. Energy Information Administration is due later on Wednesday.

Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved also weighed on prices.

Yemen’s Houthi group said it was ready to unilaterally halt attacks in the Red Sea to support peace efforts. Saudi Arabia suspended oil shipments through the strait last week after the Houthis attacked two Saudi oil tankers.

A Reuters poll showed that oil prices are likely to hold fairly steady this year and next as increased output from OPEC and the United States meets growing demand led by Asia and helps to offset supply disruptions.

OPEC has pledged to offset the loss of supply from Iran, the group’s third-biggest producer.

Looming U.S. sanctions have already started to cut Iranian exports, with buyers from its biggest customers in Asia cutting imports to a seven-month low in June.

Crude oil futures soften as bearish factors come in to play; ICE Brent down to $74.37/b, NYMEX WTI $69.40/b

S&P GLOBAL

London — Crude oil futures were showing signs of shedding their recent gains in European morning trading Friday as a sense of unease in the market and trading activity showing signs of fatigue battled to outweigh the recent bullish geopolitical news and US stock draw.

At 1000 GMT, the September ICE Brent crude futures contract was down 17 cents from the Thursday’s settle at $74.37/b, while the NYMEX WTI September contract was down 21 cents at $69.40/b.

“The softening of the near-term structure points to an underlying sense of unease,” PVM analysts said in a report Friday morning.

Adding to the bearish weight are the signs of fatigue developing in the market.

ICE Brent volumes have declined by a significant 29% between Monday and Thursday of this week, which “bares all the hallmarks of rally fatigue and will do little to underpin meek levels of upside potential,” PVM analysts said.

There is however still plenty of bullish news in the market and “in the absence of any major political or economic turmoil, Brent is likely to remain at above $70/b in the coming weeks,” Commerzbank analysts said in a morning note Friday.

Saudi Arabia, the world’s largest crude exporter, suspended all its oil shipments through the Bab el-Mandeb strait at the southern tip of the Red Sea, following an attack on two VLCCs by Yemeni Houthi militia.

Many market participants were largely unfazed by this event saying that oil trade will not be significantly disrupted by the halting of Saudi Aramco’s shipments through the strait unless the security situation deteriorates.

“The news of Saudi shipments via the Red Sea being suspended had amazingly little impact on the oil price,” Commerzbank analysts said.

Energy Information Administration data released late Wednesday — showing US crude inventories fell 6.15 million barrels to 404.94 million barrels in the week ended July 20 — and rising geopolitical tensions between the US and Iran also appear to have been digested by the market and are no longer providing much in the way of support to the oil complex.

In response to the rising tensions, PVM analysts said “once upon a time, such threats would have propelled oil prices higher…[but now] they offer little in the way of price support with market players having become accustomed to such theatrics.”

Looking towards the US, logistical issues remain, with pipeline capacity insufficient to keep up with rising production in the Permian basin.

“There is unlikely to be much relief until the second half of 2019, when new pipeline capacity is scheduled to start up,” ING analysts said in a note.

Market players will be looking towards the weather moving into next week — especially for any signs of potential hurricanes — as adverse weather conditions can have a significant impact on the oil market, potentially causing severe supply disruptions.