Oil drops as market awaits ratification of OPEC+ supply cut

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Reuters
KEY POINTS
  • Brent futures were down 21 cents, or 0.3%, at $63.18 by 0258 GMT.
  • West Texas Intermediate oil futures fell 14 cents, or 0.2%, to $58.29 a barrel. They hit $59.12 a barrel on Thursday, the highest since the end of September.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil slipped in early Asian trade on Friday, with U.S. crude moving further away from a two-month high after OPEC agreed to increase output curbs in early 2020 but failed to promise further steps after March.

Brent futures were down 21 cents, or 0.3%, at $63.18 by 0258 GMT.

West Texas Intermediate oil futures fell 14 cents, or 0.2%, to $58.29 a barrel. They hit $59.12 a barrel on Thursday, the highest since the end of September.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed to more output cuts to avert oversupply early next year as economic growth stagnates amid the U.S.-China trade war.

The agreement, which needs to be formally adopted later on Friday, will cut an extra 500,000 barrels per day (bpd) of production, through tighter compliance and some adjustments. The group has been withholding 1.2 million bpd and the increased amount represents about 1.7% of global oil output.

The “decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance,” said Edward Moya senior market analyst at OANDA.

A panel of ministers representing OPEC and non-OPEC producers led by Russia recommended the cuts, according to Russian Energy Minister Alexander Novak on Thursday.

Details need to be hammered out at an OPEC+ meeting that starts later on Friday in Vienna.

Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.

Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.

The sale was the world’s biggest IPO, beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of valuing Aramco at $2 trillion, a target sought by Saudi Crown Prince Mohammed bin Salman.

Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.

Oil gains amid push by Saudi Arabia for further supply cuts

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Reuters
KEY POINTS
  • Brent futures rose 13 cents, or 0.2%, to $61.05 a barrel by 0424 GMT, after gaining 0.7% on Monday.
  • U.S. West Texas Intermediate crude was up by 20 cents, or 0.4%, at $56.16 a barrel. The contract rose 1.4% on Monday.
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The oil tanker ‘Devon’ prepares to transfer crude oil from Kharg Island oil terminal to India in the Persian Gulf, Iran, on March 23, 2018.
Ali Mohammadi | Bloomberg | Getty Images

Oil prices rose on Tuesday, as OPEC and its allies discuss whether to deepen a supply cut pact ahead of meetings this week, although prospects after Saudi Arabia’s planned listing of Aramco fueled uncertainty for traders, limiting gains.

Brent futures rose 13 cents, or 0.2%, to $61.05 a barrel by 0424 GMT, after gaining 0.7% on Monday.

U.S. West Texas Intermediate crude was up by 20 cents, or 0.4%, at $56.16 a barrel. The contract rose 1.4% on Monday.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are discussing a plan to increase an existing supply cut of 1.2 million barrels per day (bpd) by a further 400,000 bpd and extend the pact until June, two sources familiar with the matter said.

Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering (IPO) of state-owned Saudi Aramco, the sources said.

The “oil price is little moved today, suggesting that traders are skeptical about the additional 400,000 bpd cut on top of the extension of (the) current production cut agreement,” said Margaret Yang, market analyst at CMC Markets in Singapore.

“The question is what they are going to do after the Aramco IPO and that creates uncertainty for the oil prices,” Yang said.

OPEC ministers will meet in Vienna on Thursday and the wider OPEC+ group will gather on Friday.

Concerns about the inability of the United States and China, the world’s two biggest oil users, to reach a preliminary deal to resolve their 17-month trade dispute also weighed on oil prices, along with discouraging U.S. economic data.

A senior adviser to President Donald Trump said a U.S.-China trade deal was still possible before the end of the year, adding that the first phase of the agreement was being put to paper, but the talks have been dragging on for weeks now.

And while OPEC may cut output, U.S. producers have been only to happy to match any market shortfalls, with production setting successive records. Growth into 2020, though, may range between 100,000 bpd and 1 million bpd.

U.S. crude inventories are expected to have declined last week, which may support prices, with analysts in a preliminary Reuters polls suggesting a contraction of 1.8 million barrels.

In a sign of buying interest for oil, fund managers increased net long positions in U.S. crude futures and options in the week to Nov. 26, the U.S. Commodities Futures Trading Commission said.

Oil steadies after gains driven by trade optimism

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Reuters
KEY POINTS
  • Brent crude futures were up 4 cents at $62.17 a barrel at 0330 GMT after gaining 0.7% in the previous session.
  • U.S. crude futures were down 1 cent at $56.53 a barrel. They gained 0.6% on Monday.
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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 steadied on Tuesday as investors kept an eye on U.S. inventory data due later, following two days of gains on positive economic data and hopes for a Washington-Beijing trade deal.

Brent crude futures were up 4 cents at $62.17 a barrel at 0330 GMT after gaining 0.7% in the previous session.

U.S. crude futures were down 1 cent at $56.53 a barrel. They gained 0.6% on Monday.

“This is mostly position lightening after an impressive run higher,” said Jeffrey Halley, senior market analyst at OANDA.

“Oil is vulnerable now to any sharp change in short-term investor sentiment,” he said.

U.S. crude oil inventories were forecast to have risen last week, while refined products stocks likely declined, a preliminary Reuters poll showed on Monday.

Five analysts polled by Reuters estimated, on average, that crude inventories rose around 2.7 million barrels in the week to Nov. 1.

Oil has been supported by hopes for a trade deal that could boost demand.

Chinese President Xi Jinping and U.S. President Donald Trump have been in continuous touch through “various means,” China said on Monday, when asked when and where the two leaders might meet to sign a trade deal.

Improved U.S. jobs growth numbers in October and upward revisions of the two previous months are also helping oil prices, analysts said.

Oil investors are closely watching the initial public offering of Saudi Arabia’s state oil company, Saudi Aramco, in what is expected to be the world’s biggest listing as the kingdom seeks to cash in on peaking demand for oil.

Aramco’s chairman Yasser al-Rumayyan said on Sunday the state oil giant would continue to meet its global oil supply demand after it lists on the Riyadh bourse.

On the supply side, Russia cut its oil output to 11.23 million barrels per day (bpd) last month from 11.25 million bpd in September, but again missed its obligations under a pact to curb production.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers — a group known as OPEC+ – have since January implemented a deal to cut oil output by 1.2 million barrels per day.

OPEC output rose in October from an eight-year low as a rapid recovery in Saudi Arabian production from attacks on oil plants more than offset losses in Ecuador and voluntary curbs under a supply pact, a Reuters survey found last week.

Oil prices fall after data shows bigger-than-expected build in US inventory

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Reuters
KEY POINTS
  • Oil fell on Wednesday after gaining over 1% in the previous session as U.S. industry data showed a bigger-than-expected build in crude stockpiles.
  • Brent crude futures dropped 31 cents, or 0.52%, to $59.39 a barrel by 0405 GMT on Wednesday.
  • West Texas Intermediate (WTI) crude futures for December delivery, the new front-month contract, fell 43 cents, or 0.79%, to $54.05 per barrel.
GP: Oil field workers pump jack
Oil field workers tend to a pump jack.
Ken Cedeno | Corbis News | Getty Images

Oil fell on Wednesday after gaining over 1% in the previous session as U.S. industry data showed a bigger-than-expected build in crude stockpiles, but the possibility of deeper output cuts from OPEC and its allies contained the decline.

Brent crude futures dropped 31 cents, or 0.52%, to $59.39 a barrel by 0405 GMT on Wednesday.

West Texas Intermediate (WTI) crude futures for December delivery, the new front-month contract, fell 43 cents, or 0.79%, to $54.05 per barrel. The November contract expired on Tuesday at $54.16.

U.S. crude stocks rose by 4.5 million barrels to 437 million barrels in the week ended Oct. 18, compared with analysts’ expectations for a gain of 2.2 million barrels, data from industry group the American Petroleum Institute showed.

Inventory data from the U.S. Energy Information Administration (EIA) is due later on Wednesday.

The Organization of the Petroleum Exporting Countries (OPEC) is mulling whether to deepen production cuts amid concerns of weak demand growth next year, underpinning prices after helping to lift both benchmarks on Tuesday.

“The OPEC induced oil rally has come to a grinding halt in the wake of the bearish to consensus API inventory swell,” Stephen Innes, market strategist at AxiTrader, said in a note on Wednesday.

“Further OPEC cuts are unlikely the cure-all medicine. But by the numbers, the magnitude of the expected oversupply in 2020 is thought to be well within OPEC’s ability to manage,” Innes added.

OPEC and other oil producers including Russia, a group known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020.

OPEC and other non-members are scheduled to meet again from Dec. 5 to 6.

OPEC’s de facto leader Saudi Arabia, however, wants to focus first on boosting adherence to the group’s output reduction pact before committing to more cuts, sources from the oil-producing club said.

Meanwhile, easing trade tensions between China and the United States, the world’s two largest economies and biggest oil consumers, were also helping to cushion overall sentiment for oil, traders said.

U.S. President Donald Trump said earlier this week that efforts to end the trade war with China were going well, while a similar view was echoed by Chinese Vice Foreign Minister Le Yucheng on Tuesday.

Washington and Beijing are trying to finalize the first phase of a trade agreement for Trump and Chinese President Xi Jinping to sign in November at the Asia-Pacific Economic Cooperation summit in Chile.

“Overall oil appears somewhat directionless (at current levels). Prices seem to have reached an equilibrium, for now, awaiting developments on trade and ahead o

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.
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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.