Oil weighed down by record Saudi output; markets await G20, OPEC meetings

CNBC

  • Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.
  • International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Ali Jarekji | Reuters
The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.

International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.

Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe.

Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda.

OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.

In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production.

Despite this, most analysts expect OPEC to start withholding supply again soon.

“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank.

“If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.

“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.

Oil near late-2014 highs as Saudi pushes for higher prices, US crude stocks decline

CNBC

  • Oil prices remained close to highs touched the previous day that were last seen in late 2014.
  • The EIA said on Wednesday that commercial crude stocks fell by 1.1 million barrels last week.
  • Reuters reported that Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel.

An oil pumpjack operates near Williston, North Dakota.

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

Oil prices on Thursday remained close to late 2014-highs reached in the previous session as U.S. crude inventories declined and as top exporter Saudi Arabia pushes for prices of $80 to $100 per barrel by continuing to withhold supplies.

Brent crude oil futures were at $73.82 per barrel at 0325 GMT, up 34 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 28 cents, or 0.4 percent, at $68.75 a barrel.

Brent on Wednesday marked its highest level since November, 2014 at $73.93 per barrel. WTI hit its strongest since December, 2014 at $68.91 a barrel.

Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, which was seen as a sign that Riyadh will seek no changes to an OPEC supply-cutting deal that was introduced in 2017 to boost prices.

“The Saudis and their colleagues in OPEC need higher oil for their fiscal positions and the Kingdom is on a bold – and costly – reform program. So they might continue to squeeze the lemon while they have the chance,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) and a group of other producers that includes Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

“We are rapidly transitioning from a market drowning in oil (2014-2016) to a new reality of undersupply and low storage levels,” said Richard Robinson, manager of the Ashburton Global Energy Fund.

Since the start of the voluntary restraint, crude inventories have been gradually declining from record levels towards long-term average levels.

Further supporting oil prices is an expectation that the United States will re-introduce sanctions against OPEC-member Iran, which could result in further supply reductions from the Middle East.

In the United States, the Energy Information Administration (EIA) said on Wednesday that commercial crude stocks fell by 1.1 million barrels in the week to April 13, to 427.57 million barrels, which is close to the five-year average level around 420 million barrels.

“Oil prices have the potential to rise another 15 percent over the remainder of 2018,” Robinson said.

With crude prices on the rise, those producers not participating in voluntary restraint are ramping up output.

U.S. crude production has jumped by a quarter since mid-2016,to a record 10.54 million barrels per day (bpd).

That’s more than Saudi Arabia produces. Only Russia churns out more oil, at almost 11 million bpd.