Oil prices dip as Iran signals support for small OPEC supply increase

CNBC

  • Oil prices dipped as Iran signaled it could be won over to a small rise in OPEC crude output.
  • That likely paved the road for the producer cartel to agree on a supply increase.

OPEC

Heinz-Peter Bader | Reuters

Oil prices dipped on Thursday as Iran signaled it could be won over to a small rise in OPEC crude output, likely paving the road for the producer cartel to agree on a supply increase during a meeting on June 22.

However, prices were prevented from falling further by record refinery runs in the United States and a large decline in U.S. crude inventories, a sign of strong fuel demand in the world’s biggest economy.

Brent crude futures, the international benchmark for oil prices, were at $74.55 per barrel at 0040 GMT, down 19 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $65.63 a barrel, down 8 cents.

Iran, a major supplier within the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC), signaled on Wednesday it could agree on a small increase in the group’s output during a meeting at OPEC’s headquarters in Vienna on June 22.

“There appears to be an air of confidence that this deal will move through,”said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

How this week's OPEC meeting could impact oil prices

How this week’s OPEC meeting could impact oil prices  

Tehran had previously resisted pressure by OPEC’s de-facto leader Saudi Arabia to raise output.

OPEC, together with other key producers including Russia, started withholding output in 2017 to prop up prices, but a tightening market in 2018 led to calls by major consumers for more supplies.

In a sign of strong demand, U.S. refineries processed a seasonal record of 17.7 million barrels per day (bpd) of crude oil last week, according to data from the Energy Information Administration (EIA) said on Wednesday.

Amid strong consumption, commercial U.S. crude inventories dropped by 5.9 million barrels in the week to June 15, to 426.53 million barrels, the EIA said.

U.S. crude oil prodution was flat week-on-week, remaining at a record 10.9 million bpd.

Oil prices dip on unexpected growth in US crude stocks

CNBC

  • Oil prices dropped on Thursday, weighed down by a surprise rise in U.S. crude inventories.
  • A possible production increase by OPEC and non-OPEC members including Russia has been in focus.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices dropped on Thursday, weighed down by a surprise rise in U.S. crude inventories and by expectations that OPEC and other producers could increase output at a meeting in June.

Brent crude was down 20 cents at $77.30 per barrel at 0041 GMT, after settling the last session up 2.8 percent.

U.S. West Texas Intermediate crude was down 20 cents at $68.01 a barrel. In the previous session, it settled up $1.48, or 2.2 percent, at $68.21 per barrel.

U.S. crude inventories rose by 1 million barrels in the week to May 25 to 434.9 million barrels, according to data from industry group the American Petroleum Institute, although analysts had expected a decrease of 525,000 barrels.

Data from the Energy Information Administration is due at 11 a.m. EDT (1500 GMT) on Thursday, a day later than usual due to a public holiday on Monday.

Oil prices driven more by financial markets than physical ones, says oil expert

Oil prices driven more by financial markets than physical ones, says oil expert  

A possible production increase by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members including Russia has been in focus, especially after Saudi Arabia, de facto leader of the oil cartel, and Russia have discussed boosting output by some 1 million barrels per day.

OPEC and some non-OPEC members have committed to curb their output by about 1.8 million barrels per day until the end of 2018, and they will meet in Vienna on June 22 whether or not their commitment should remain unchanged.

“With the OPEC meeting still another three weeks away, oil prices are likely to remain sensitive to headlines,” ANZ bank said in a note.

A Gulf source familiar with the thinking of Saudi Arabia said OPEC and its allies aim to continue their agreement to cut oil output by the end of this year but are ready to make gradual adjustments to offset any supply shortfall.

Oil markets firm as Brent edges ever closer to $80 per barrel on tight market

CNBC

  • Oil prices firmed on Thursday, with Brent crude creeping ever closer to $80 per barrel.
  • U.S. bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020.
  • Not all pointed to a tighter market, however.

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil prices firmed on Thursday, with Brent crude creeping ever closer to $80 per barrel, a level it has not seen since November 2014, as supplies tighten while demand remains strong.

Brent crude futures were at $79.32 per barrel at 0027 GMT, up 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $71.68 a barrel, up 19 cents, or 0.3 percent, from their last settlement.

ANZ bank said on Thursday that Brent was “now threatening to break through $80 per barrel … (as) geopolitical risks continue to support prices, (and) an unexpected fall in inventories in the U.S. got investors excited yesterday.”

U.S. crude inventories dropped by 1.4 million barrels in the week to May 11, to 432.34 million barrels.

ANZ said the falling U.S. inventories were “raising concerns of tight markets heading into the U.S. driving season,” during which demand typically rises.

Looking beyond seasonal changes, U.S. bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020, due to a steady increase in demand.

Everything bullish?

Not all pointed to a tighter market, however.

The International Energy Agency (IEA) said on Wednesday that it had lowered its global oil demand growth forecast for 2018 from 1.5 million barrels per day (bpd) to 1.4 million bpd.

The IEA said global oil demand would average 99.2 million bpd in 2018.

And although supplies currently only stand at 98 million bpd due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), the IEA said that “strong non-OPEC growth … will grow by 1.87 million bpd in 2018.”

Leading production increases is the United States, where crude output has soared by 27 percent in the last two years, to a record 10.72 million bpd.

That puts the United States within reach of top producer Russia, which pumpsaround 11 million bpd.

As a result of its surging production, U.S. crude is increasingly appearing on global markets as exports.

Commodity brokerage Marex Spectron said that the surge in U.S. supplies was a “strongly price-bearish development.”

It said the economic outlook was also “firmly bearish” as “short-term credit conditions have worsened which … hasn’t been priced correctly by the market”.

The brokerage also said that U.S. energy intensity “continues to decrease which is never good news for the future consumption of oil”.

Oil prices hit highest in years as markets adjust to looming sanctions on Iran

CNBC

  • Oil prices clocked up more multi-year highs on Thursday.
  • Traders adjusted to the prospects of renewed U.S. sanctions against Iran amid an already tightening market.
  • In China, which is Iran’s single biggest buyer of oil, Shanghai crude futures posted their biggest intra-day rally since their launch in March.

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 clocked up more multi-year highs on Thursday as traders adjusted to the prospects of renewed U.S. sanctions against major crude exporter Iran amid an already tightening market.

The United States plans to impose new sanctions against Iran, which produces around 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 which limited Tehran’s nuclear ambitions in exchange for removing U.S.-Europe sanctions.

Oil prices rose sharply in response to the announced measures.

Brent crude futures, the international benchmark for oil prices, hit their strongest since November 2014 at $77.76 per barrel on Thursday.

U.S. West Texas Intermediate (WTI) crude futures also marked a November-2014 high, at $71.75 a barrel, and they still stood at $71.67 a barrel at 0219 GMT, up over half a dollar, or 0.7 percent, from their last settlement.

In China, which is Iran’s single biggest buyer of oil, Shanghai crude futures posted their biggest intra-day rally since their launch in March, rising more than 4 percent to a dollar-denominated record of around $73.40 per barrel.

Goldman Sachs said the planned unilateral U.S. sanctions against Iran would likely have a “high level of efficiency”.

Oil's historical performance from May-August

Oil’s historical performance from May-August  

As a result of sanctions and because of risks to supplies elsewhere,especially in Venezuela, the U.S. bank said “this leaves risk our summer $82.50 per barrel Brent price forecast (is) squarely skewed to the upside”.

Analysts had little hope that opposition to the U.S. action would preventsanctions from going ahead.

“Europe and China will not fight against the U.S. sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the U.S.,” said energy consultancy FGE.

“We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed. As before, it may take several rounds of reductions to reach target levels,” FGE’s founder and chairman Fereidun Fesharaki wrote in a note. He added that condensate, a super-light form of crude oil that was excluded in the last round of sanctions, may well be included.

Despite this, Fesharaki said the near-term impact on the oil market would be limited due to a 180-day wind down period as planned sanctions are implemented.

“But the impact will escalate as we approach November (i.e. the end of 180-day wind down period) … Oil prices will certainly move up, and $90-100 per barrel prices may again be on the cards.”

Sanctions come amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.

U.S. crude inventories fell by 2.2 million barrels in the week to May 4, to 433.76 million barrels, according to the Energy Information Administration (EIA), slightly above the 420 million barrels five-year average level.

One factor that could prevent markets from tightening further is soaring U.S. oil output.

Weekly U.S. crude oil production hit another record last week, climbing to 10.7 million barrels per day (bpd).

That’s up 27 percent since mid-2016 and means U.S. output is creeping ever closer to that of top producer Russia, which pumps around 11 million bpd.

Oil inches lower on expectations for US crude stock build

CNBC

  • Oil prices slipped on expectations for a build-up in U.S. crude inventories.
  • Russian government comments on prospects for stepping up cooperation with OPEC to coordinate output cuts braked steeper declines.
  • Official U.S. inventory data will be published by the Energy Information Administration late on Wednesday.

Oil jack pumps in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters
Oil jack pumps in the Kern River oil field in Bakersfield, California.

Oil prices slipped on Wednesday on expectations for a build-up in U.S. crude inventories, but Russian government comments on prospects for stepping up cooperation with OPEC to coordinate output cuts braked steeper declines.

U.S. WTI crude futures were at $63.36 a barrel at 0208 GMT, down 15 cents, or 0.24 percent, from their previous settlement.

Brent crude futures dipped to $67.94 per barrel, down 18 cents, or 0.26 percent, after it rose 0.7 percent on Tuesday.

U.S. crude inventories likely saw a build for the second straight week, while refined product stockpiles were forecast to have declined last week, an expanded Reuters poll showed on Tuesday.

“With the change in prices being only a few cents, I think the oil market is waiting for the next development and of course the U.S. inventories data due tonight (Wednesday) is very good reason for traders to be waiting,” said Michael McCarthy, Chief Market Strategist at brokerage CMC Markets.

Industry group the American Petroleum Institute, however, said on Tuesday U.S. crude stocks have unexpectedly fallen last week as refineries boosted output.

“With total combined stocks of crude oil and refined products coming in around unchanged on the week, I would call it a neutral data point,” said Dominic Chirichella, senior partner at the Energy Management Institute in New York.

Official U.S. inventory data will be published by the Energy Information Administration late on Wednesday.

“The EIA data has not (always) been in sync with the API data so we could see a different set of data points Wednesday morning,” Chirichella said.

Meanwhile, Russian Energy Minister Alexander Novak said on Tuesday that a joint organisation between the Organization of the Petroleum Exporting Countries and non-OPEC countries may be set up after the current deal on production cuts expires at the end of this year.

“Russia is testing the upper production bands but provided they don’t ramp up dramatically I think this news will be viewed in a positive light for prices,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

Oil has risen from a multi-year low near $27 a barrel in January 2016, helped by production cuts led by OPEC and Russia, which began in 2017 in order to rein in over-supply and prop up prices.

Top producer Russia’s oil output rose in March to 10.97 million barrels per day, up from 10.95 million bpd in February, official data showed earlier this week, prompting some traders to worry the OPEC-non-OPEC alliance to help balance oil markets was under threat.