Oil prices steady on extended supply cuts, US stocks draw

CNBC

Reuters

KEY POINTS
  • Brent crude futures for September delivery were trading up 36 cents, or 0.6%, at $62.76 a barrel by 0244 GMT.
  • U.S. crude futures for August were up 29 cents, or 0.5%, at $56.54 a barrel.
  • Both benchmarks fell more than 4% on Tuesday as worries about a slowing global economy overshadowed OPEC supply cuts.
Reusable: Oil pump jack leased by Devon Energy 150922
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices edged higher on Wednesday after a steep fall in the previous session, supported by extended output cuts by OPEC and its allies despite concerns that a slowing global economy could crimp demand.

An expected large draw in U.S. crude oil inventories also underpinned sentiment after a bigger-than-expected stocks fall in a private survey.

Brent crude futures for September delivery were trading up 36 cents, or 0.6%, at $62.76 a barrel by 0244 GMT.

U.S. crude futures for August were up 29 cents, or 0.5%, at $56.54 a barrel. Both benchmarks fell more than 4% on Tuesday as worries about a slowing global economy overshadowed OPEC supply cuts.

The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.

“The OPEC+ meeting showed the members sticking together in tough times, characterized by weakening global demand outlook, aiming for a more balanced oil market, despite clear market share implications,” said Amarpreet Singh, analyst at Barclays Commodities Research in a note.

“This is supportive of oil prices, in our view, even as the market remains squarely focused on weak macro signals.”

Ahead of government data due later on Wednesday, industry group the American Petroleum Institute (API) said that U.S. crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels.

The OPEC+ agreement to extend oil output cuts for nine months should draw down oil inventories in the second half of this year, boosting oil prices, said analysts from Citi Research in a note.

“Keeping cuts through the end of 1Q aims to avoid putting oil into the market during a seasonal low for demand and refinery runs, as well as providing time to assess the impacts of IMO 2020,” they said.

Still, signs of a global economic slowdown hitting oil demand growth worried investors after global manufacturing indicators disappointed and the U.S. opened another trade front after threatening the EU with more tariffs to offset government aid to the aviation industry.

Barclays expects demand to grow at its slowest pace since 2011, gaining less than 1 million barrels per day year-on-year this year.

Morgan Stanley, meanwhile, lowered its long-term Brent price forecast on Tuesday to $60 per barrel from $65 per barrel, and said the oil market is broadly balanced in 2019.

Crude prices were also capped by signs of a recovery in oil exports from Venezuela in June and growth in oil production in Argentina in May.

Oil prices ease as demand worries counter OPEC supply cut extension

CNBC

Reuters

KEY POINTS
  • Brent crude futures for September delivery were trading down 15 cents, or 0.2%, at $64.91 a barrel by 0311 GMT after dipping to $64.66 earlier.
  • U.S. crude futures for August were down 25 cents, or 0.4%, at $58.84 a barrel, after touching their highest in over five weeks on Monday.
Reusable: Iraq Oil Daura oil refinery Bagdad 091105
An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner
Getty Images

Oil prices drifted lower on Tuesday, as weak global data raised concerns about future demand for the commodity despite a positive boost from OPEC’sdecision to extend supply cuts until next March.

Brent crude futures for September delivery were trading down 15 cents, or 0.2%, at $64.91 a barrel by 0311 GMT after dipping to $64.66 earlier.

Brent climbed more than $2 a barrel on Monday before paring gains later in the day.

U.S. crude futures for August were down 25 cents, or 0.4%, at $58.84 a barrel, after touching their highest in over five weeks on Monday.

“After 2-1/2 years of production cuts, the effects of rolling over production cuts is losing steam,” said Edward Moya, senior market analyst at OANDA in New York, adding that markets remained nervous about demand.

“The trade war is not likely to get resolved any time soon and while central banks globally are expected to deliver fresh stimulus in the coming months, economic activity is continuing to trend lower.”

While the U.S. and China agreed at a recent Group of 20 leaders summit to restart trade talks, indications that factory activity shrank across much of Europe and Asia in June while growth in manufacturing cooled in the United States weighed on oil prices.

“The weaker PMI prints killed sentiment overnight, and the market started to factor in the realm of the unknown around shale (oil), so (investors) were worried about the fear of oversupply in the face of weaker demand,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

However, the decision to extend production curbs would continue to support oil prices, as OPEC looked to maintain market equilibrium, he said.

The Organization of the Petroleum Exporting Countries (OPEC) agreed on Monday to extend oil supply cuts until March 2020 as the group’s members overcame their differences in order to try to prop up the price of crude.

OPEC is slated to meet with Russia and other producers, an alliance known as OPEC+, later on Tuesday to discuss supply cuts amid surging U.S. output.

Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend global output cuts until December 2019 or March 2020.

Russia reduced oil production in June by more than the amount agreed in a global deal to cut output, the energy minister and industry sources said on Monday, as the sector felt the impact of a contaminated crude crisis that crippled exports.

Meanwhile, U.S. producers hit a monthly record of 12.16 million barrels per day (bpd) in April, data showed, though new U.S. shale oil production is expected to slip this year from last year, according to a survey of major forecasters.

Oil prices drop amid demand worries, but US-Iran tensions support

CNBC

Reuters

KEY POINTS
  • Benchmark Brent crude futures were down 57 cents, or 0.9%, at $64.29 a barrel by 0342 GMT. They dropped 0.5% on Monday.
  • U.S. crude futures were down 58 cents, or 1%, at $57.32 a barrel. The U.S. benchmark rose 0.8% in the previous session.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil fell on Tuesday amid concerns over the outlook for crude demand, but prices were supported after Washington announced new sanctions on Iran amid mounting tensions in the Middle East.

Benchmark Brent crude futures were down 57 cents, or 0.9%, at $64.29 a barrel by 0342 GMT. They dropped 0.5% on Monday.

U.S. crude futures were down 58 cents, or 1%, at $57.32 a barrel. The U.S. benchmark rose 0.8% in the previous session.

Brent climbed 5% last week and U.S. crude surged 10% after Iran shot down a U.S. drone on Thursday in the Gulf, adding to tensions stoked by attacks on oil tankers in the area in May and June. Washington has blamed the tanker attacks on Iran, which denies having any role.

U.S. President Donald Trump targeted Iranian Supreme Leader Ayatollah Ali Khamenei and other top Iranian officials with sanctions on Monday, taking an unprecedented step to increase pressure on Iran after Tehran’s downing of the drone.

“This would appear to effectively rule out any talks or negotiations to end the crisis,” said Tom O’Sullivan, founder of energy and security consultancy Mathyos Advisory.

Trump also said on Twitter that other countries should protect their own oil shipping in the Middle East rather than have the United States protect them.

Some said the threat of immediate military conflict had eased slightly.

“Traders have lessened their odds for an immediate U.S.-Iran escalation in this forever smouldering hot spot,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Meanwhile, hopes are waning for progress in Sino-U.S. trade talks at this week’s G20 meeting as investors await a meeting between Trump and Chinese President Xi Jinping. That could further hurt global growth prospects, hitting demand for oil and other commodities.

Weak manufacturing data released on Monday by the Federal Reserve Bank of Dallas added to worries about slipping demand for crude oil.

However, supply is expected to remain relatively tight, as the Organization of the Petroleum Exporting Countries and its allies including Russia, an alliance known as OPEC+, appear likely to extend a deal on curbing output when they meet on July 1-2 in Vienna, analysts said.

Russian Energy Minister Alexander Novak said on Monday that international cooperation on crude production had helped stabilize oil markets and was more important than ever. He also voiced concerns about demand.

Sanctions on Iran and Venezuela imposed by Washington have cut oil exports from the two OPEC members but U.S. production has been rising, leading some Russian officials to accuse Washington of carving out market share for its energy exports.

Oil prices spike more than 3% on reports that US will end waivers for Iran sanctions

KEY POINTS
  • Brent crude futures surged more than 3 percent to over $74 per barrel on Monday morning during Asia hours, while U.S. crude futures rose around 2.67 percent to $65.71 per barrel.
  • The oil spike followed reports that U.S. Secretary of State Mike Pompeo will announce that from May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate.
GP: Iran Oil Tanker 190121
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 spiked by more than 3 percent on Monday — past highs not seen since November 2018 — after reports that Washington is set to announce that all buyers of Iranian oil will have to end imports, or be subject to U.S.sanctions.

Brent crude futures surged more than 3 percent to over $74 per barrel on Monday morning during Asia hours, while U.S. crude futures rose around 2.67 percent to $65.71 per barrel.

That price spike followed a report by the Washington Post, citing two unnamed State Department officials, that U.S. Secretary of State Mike Pompeo will announce that “as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate.” Condensate is an ultra-light form of crude oil.

Following that report, Reuters confirmed the news, citing a source familiar with the matter.

VIDEO03:22
Oil prices could hit $80 per barrel in first half of 2019: JBC Energy

Brent prices have risen by more than a third this year, while U.S. crude has soared more than 40 percent.

The U.S. reimposed sanctions in November on exports of Iranian oil after U.S. President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers. Washington, however, granted Iran’s eight main buyers of oil, mostly in Asia, waivers to the sanctions which allowed them limited purchases for an additional six months.

Impact on India

The eight buyers are China and India — Iran’s biggest customers — as well as JapanSouth KoreaItalyGreeceTurkey and Taiwan.

“The sanctions (are) obviously one of the major movers, I think, which is influencing prices,” said Daryl Liew, head of portfolio management at financial services company Reyl Singapore. He also pointed to stronger-than-expected economic growth data from China last week, which could be driving demand expectations.

Of the buyers of Iranian oil, he said India could suffer the most from Washington’s move.

“I think India is probably one of the key potential countries that might suffer from a higher oil price, in terms of their current account deficit, for example. And that’s going to be basically putting pressures on inflationary pressures as well,” Liew said, speaking on CNBC’s “Street Signs” on Monday.

“No doubt the Indian central bank has … turned to a more dovish stance in recent meetings. But if oil prices continue to hit higher, and inflationary pressures come back into the picture again for India especially, then the central bank probably has to reverse the dovish moves,” he concluded.

Tightening supplies, Libya conflict

That development on sanctions comes as global oil supply is already tightening, with OPEC leading supply cuts since the beginning of this year, to prop up crude prices.

In the U.S., energy firms last week reduced the number of oil rigs operating by two, to 825, General Electric’s Baker Hughes energy services firm said in its weekly report on Thursday.

VIDEO06:10
Oil prices likely to head higher as OPEC stands firm on production cuts, says RBC’s Helima Croft

Meanwhile, major OPEC oil producer Libya’s capital Tripoli was hit by a series of airstrikes and explosions over the weekend, in escalating violence that could threaten oil supply further.

The country has been torn by conflict since the fall of dictator Muammar Gaddafi in 2011. It was sent into fresh conflict in recent weeks after its eastern military leader ordered his forces to move in on the capital where the United Nations-recognized government sits.

Analysts and traders keep a close eye on Libya because its oil production has been one of the biggest wild cards in the oil market in recent years. Its output has fluctuated wildly as the nation’s southern oil fields have frequently gone offline amid fighting.

One analyst told CNBC on Monday that the Libya situation will put more pressure on oil prices, particularly if the conflict escalates.

“Libya is producing 1.1 million barrels per day. If things go wrong, immediately somewhere around 300,000 to 400,000 barrels per day of oil may be affected,” said Kang Wu, head of analytics for Asia at S&P Global Platts.

“A lot depends on how Saudi Arabia will react to the situation — they have surplus capacity — but supply concerns will keep pressure on oil prices in the short term, ” Wu added.

— Reuters and CNBC’s Tom DiChristopher contributed to this report.

Oil prices edge higher, but future demand concerns cap gains

CNBC

 | 
Reuters
KEY POINTS
  • Brent was up by 17 cents, or 0.3 percent, at $68.14 by 0311 GMT, reversing earlier losses of a similar magnitude.
  • U.S. crude futures added 9 cents, or 0.2 percent, to $60.03, also reversing losses in earlier trade.
Reusable: Oil worker 130728
Andrew Burton | Getty Images

Oil prices crept up on Wednesday, extending the previous session’s rise, but gains were kept in check amid growing fears over the impact of a global economic slowdown on demand.

Brent was up by 17 cents, or 0.3 percent, at $68.14 by 0311 GMT, reversing earlier losses of a similar magnitude. On Tuesday, the global benchmark rose 76 cents to $67.97 a barrel, not far below its year-to-date high of $68.69, reached on March 21.

U.S. crude futures added 9 cents, or 0.2 percent, to $60.03, also reversing losses in earlier trade. The U.S. benchmark rose $1.12, or 1.9 percent, to $59.94 a barrel in the previous session.

“We seem to have reached a state of equilibrium after the recent headline-driven choppy trading and we need to see some new impetus for price direction,” said Jeff Halley, senior market analyst at OANDA in Singapore.

That is unlikely to come until there is a conclusion on the U.S.-China trade talks, he added, referring to negotiations that restart on Thursday as the world’s two largest economies seek to end an eight-month old trade war.

Oil rose on Tuesday as Venezuela’s main oil export port of Jose and its four crude upgraders were unable to resume operations following a massive power blackout on Monday, the second in a month.

Prices have risen more than 25 percent this year, supported by supply curbs by the Organization of the Petroleum Exporting Countries and other major producers, along with U.S. sanctions on exports from Venezuela and Iran.

But worries about demand have limited oil’s rally as manufacturing data from Asia, Europe and the United States pointed to an economic slowdown.

The American Petroleum Institute, a trade organization, said late on Tuesday that U.S. crude inventories rose 1.9 million barrels in the latest week, while analysts had forecast a decrease of 1.2 million barrels.

The market was waiting to see whether official figures due later on Wednesday would confirm the API data.

“It will be very interesting to see the inventory numbers tonight. If we see a fall we could see a sharp move higher,” OANDA’s Halley said.

Hedge funds and other money managers have increased bets that demand for oil will be sustained, even as the market rallied last week.