Oil skids as U.S. inventories pile up, but demand hopes stem bigger drop

REUTERS

SINGAPORE (Reuters) – Oil prices dropped on Wednesday after U.S. industry data showed a surprise build in crude inventories, but expectations for firmer demand next year kept losses in check.

Brent crude futures LCOc1 dropped 38 cents, or 0.57%, to $65.72 a barrel by 0730 GMT on Wednesday. The international benchmark rose 1.2% to $66.10 a barrel on Tuesday.

West Texas Intermediate (WTI) crude futures CLc1 fell 46 cents, or 0.75%, to $60.48 per barrel.

Wednesday’s declines followed a gain of more than 1% in the previous session as the “phase one” U.S.-China trade deal announced last week eased pressure on the oil benchmarks.

Prior to the agreement, oil markets were hampered by worries over the economic impact of the trade dispute between the world’s two biggest oil consumers.

“The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly U.S. crude inventory report,” said Stephen Innes, market strategist at AxiTrader. However, he added that “it’s unlikely to be a game-changer.”

“Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020.”

U.S. crude inventories climbed 4.7 million barrels in the week to Dec. 13 to 452 million, compared with analysts’ expectations for a draw of 1.3 million barrels, data from industry group the American Petroleum Institute showed.

But a drop in official inventory data from the U.S. Energy Information Administration (EIA) due later on Wednesday could give oil more upward impetus, said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

The drop in prices Wednesday morning “are minuscule, with oil’s price action continuing to be constructive,” Halley said.

Deeper production cuts coming from the Organization of the Petroleum Exporting Countries and allies such as Russia – a group known as OPEC+ – also continued to support market sentiment and prevented a further slide in prices.

OPEC+, which has cut production by 1.2 million barrels per day (bpd) since Jan. 1 this year, will make a further oil supply cut of 500,000 bpd from Jan. 1, 2020, to support the market.

Reporting by Koustav Samanta; Editing by Jacqueline Wong and Tom Hogue

Oil prices gain as OPEC revises deficit forecast

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Reuters
KEY POINTS
  • Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.
  • West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.
GP: Oil field workers pump jack 191120
Oil field workers with Wisco work on a pump jack in North Dakota, the United States, on November 6, 2013.
Ken Cedeno | Corbis News | Getty Images

Oil prices edged higher on Thursday with the market mood switching to relief as OPEC forecast a supply deficit next year, from doom and gloom over data showing a surprise increase in U.S. crude inventories.

Brent futures rose 24 cents, or 0.4% to $63.96 a barrel by 0242 GMT, after skidding 1% on Wednesday on the U.S. stocks build-up.

West Texas Intermediate crude was down 10 cents, or 0.2%, at $58.85 a barrel, following a 0.8% drop the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought — even before the latest pact with other producers to curb supply takes effect.

The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as U.S. production growth begins to slow.

Still, U.S. inventories are on the rise. Crude stockpiles last week rose unexpectedly, gaining more than 800,000 barrels, compared with a Reuters poll that forecast a 2.8 million barrel decline.

Inventories of petroleum products also increased with gasoline stocks surging by more than 5 million barrels and distillates gaining a bit over 4 million barrels — with both more than double expectations.

“The overall report was very bearish as demand fell off a cliff and total stockpiles climbed to the highest level in seven months,” said Edward Moya, senior market analyst at OANDA.

Beyond the balance between inventories and supply, investors are also awaiting news on negotiations between Washington and Beijing to end a long-running trade war and get an agreement before another round of U.S. sanctions kicks in.

The lingering battle between the world’s two biggest economies has hit global growth, in the process denting demand for crude and oil products.

U.S. President Donald Trump is expected to discuss tariffs on Chinese goods set to be imposed on Dec. 15 with top trade advisers as markets brace for fallout in China’s reaction.

“In the near-term, U.S.-China trade remains the primary catalyst and the 500-pound gorilla in the room,” said Stephen Innes, chief Asia market strategist at AxiTrader.

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 hover near January lows amid surging supply, economic slowdown

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Reuters

KEY POINTS
  • Front-month Brent crude futures were at $60.78 at 0246 GMT. That was 15 cents, or 0.3%, above last session’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.84 per barrel, 16 cents, or 0.3%, above their last settlement.
Reusable CNBC: oil drilling rig West Texas 150825-Brennan
Morgan Brennan | CNBC

Oil prices steadied on Thursday after falling to near 5-month lows in the previous session, but sentiment remained weak as markets are under pressure from rising U.S. supply and a stalling economy.

Front-month Brent crude futures were at $60.78 at 0246 GMT. That was 15 cents, or 0.3%, above last session’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.84 per barrel, 16 cents, or 0.3%, above their last settlement.

Brent and WTI on Wednesday hit their lowest levels since mid-January at $59.45 and $50.60 per barrel, respectively, amid a surge in U.S. crude inventories and record production, and as a global economic slowdown was starting to hit energy demand.

Despite Thursday’s gains, oil markets have moved into bear territory as defined by a 20% fall from recent peaks reached in late April.

U.S. crude production rose to a record 124.4 million barrels per day (bpd) in the week to May 31, the Energy Information Administration (EIA) said on Wednesday, an increase of 1.63 million bpd since May 2018.

Amid surging output, U.S. commercial crude inventories surged by 6.8 million in week to May 31, to 483.26 million barrels, their highest levels since July 2017.

“Rising U.S. production is more than offsetting the efforts from the OPEC+ and if we add the negative effect a trade war could have on energy demand the result is lower prices,” said Alfonso Esparza, senior analyst at futures brokerage OANDA.

The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers including Russia, known as OPEC+, have been withholding oil supply since the start of the year to prop up the market.

But outside OPEC+ supply is rising, not just in the United States.

Oil output at Kazakhstan’s Kashagan field reached a record 400,000 bpd this week, industry sources told Reuters.

Output rose after completion of maintenance in May. Prior to that, production at Kashagan was about 330,000 to 340,000 bpd.

With supply ample despite the OPEC-led cuts, much will depend on demand.

Bank of America Merrill Lynch said this week “global oil demand growth is running at the weakest rate since 2012” at below 1 million bpd, and that this was “leading the selloff” in oil prices recently.

Global economic growth took a dip late last year before recovering in early 2019, but analysts now warn growth is stalling again.

“The nascent recovery has stalled amid trade tensions,” Morgan Stanley said.

The U.S. bank said it expected this downturn to result in “the lowest growth rate since global financial crisis” of 2008/2009.

Oil prices gain after fall in US crude inventories

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.4%, at $59.07 a barrel by 0258 GMT. They closed down 0.6% on Wednesday after hitting their lowest since March 12 at $56.88.
  • Brent crude futures, the international benchmark for oil prices, were up 14 cents, or 0.2 percent, at $69.59 a barrel. They fell nearly 1% in the previous session after dropping as low as $68.08.
RT: Iran oil platform and Iranian flag 050725
A gas flare on an oil production platform is seen alongside an Iranian flag in the Gulf.
Raheb Homavandi | Reuters

Oil prices rose on Thursday after an industry report showed a decline in U.S.crude inventories that exceeded analyst expectations.

U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.4%, at $59.07 a barrel by 0258 GMT. They closed down 0.6% on Wednesday after hitting their lowest since March 12 at $56.88.

Brent crude futures, the international benchmark for oil prices, were up 14 cents, or 0.2 percent, at $69.59 a barrel. They fell nearly 1% in the previous session after dropping as low as $68.08.

Crude prices have been supported by output cuts by OPEC and other major producers as well as falling supplies from Iran, but signs of China’s readiness to escalate a trade war with the United States have raised concerns about future demand.

U.S. crude inventories fell by 5.3 million barrels in the week to May 24 to 474.4 million barrels, data from industry group, the American Petroleum Institute, showed.

That was a much larger drop than the 900,000-barrel fall expected by analysts polled by Reuters.

Weekly U.S. oil inventory data has been delayed by Monday’s Memorial Day holiday, with the official data from the Energy Information Administration (EIA) due on Thursday at 11 a.m. EDT (1500 GMT).

“If we do get a decent draw with U.S. inventories from the EIA report, we should see crude continue to stabilize,” Edward Moya, senior market analyst at OANDA in New York told Reuters in an email.

Crude prices remain supported by overall supply tightness.

Iranian May crude exports fell to less than half of April levels at around 400,000 barrels per day (bpd), tanker data showed and two industry sources said, after the United States tightened sanctions on Tehran’s main source of income.

Official data released on Thursday in Japan showed imports of Iranian surged more than 800 percent in April, from a year earlier, as refiners stocked up on crude from the country before the U.S. ended waivers on sanctions this month.

Many expect supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to be extended in a meeting next month.

Crude prices have risen by about 30 percent since the start of the year when OPEC+, which includes Russia, cut production to reduce a global glut.