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.
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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

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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.

Oil prices fall on surging US crude stockpiles, economic concerns

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Reuters

KEY POINTS
  • Brent crude futures, the international benchmark for oil prices, were at $70.62 per barrel at 0109 GMT, down 37 cents, or 0.5 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were down by 31 cents, or 0.5 percent, at $61.11 per barrel.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
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Oil prices dropped on Thursday, extending falls from the previous session amid surging U.S. crude inventories and weak demand from refineries.

Brent crude futures, the international benchmark for oil prices, were at $70.62 per barrel at 0109 GMT, down 37 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down by 31 cents, or 0.5 percent, at $61.11 per barrel.

Crude futures already fell by around 2 percent the previous day.

“Rising inventories and a slowdown with refined product demand could suggest we could see further pressure (on prices),” said Edward Moya, senior analyst at futures brokerage OANDA.

U.S. crude oil inventories rose last week, hitting their highest levels since July 2017, due to weak refinery demand, the Energy Information Administration said on Wednesday.

Commercial U.S. crude inventories rose by 4.7 million barrels in the week ended May 17, to 476.8 million barrels, their highest since July 2017, the EIA data showed.

Beyond weak refinery demand for feedstock crude oil, the increase in commercial inventories also came on the back of planned sales of U.S. strategic petroleum reserves (SPR) into the commercial market.

U.S. crude oil production climbed by 100,000 barrels per day (bpd) to 12.2 million bpd, putting output near its record of 12.3 million bpd reached late last month.

Ole Hansen, head of commodity strategy at Saxo Bank, said “concerns about slowing (oil) demand growth due to the negative impact on the global economy of the U.S.-China trade war ” were also weighing on oil prices.

Countering these bearish price factors have been escalating political tensions between the United States and Iran, as well as ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) that started in January in an effort to prop up the market.

“Large but opposing forces have kept Brent in a $70-$75 per barrel range in recent weeks,” Morgan Stanley said in a note on oil markets published this week.

“Macro economic data has rapidly deteriorated, and this is reflected in weaker oil demand. At the same time, downside risk to supply is materializing in key countries (adding to OPEC’s production cuts),” the U.S. bank said.

“On balance, however, we still see tightness in 2H19,” Morgan Stanley said, adding it expected Brent to trade in the $75-$80 per barrel range in the second half of 2019.

French bank BNP Paribas said high inventories meant that OPEC would likely keep its voluntary supply cuts in place.

“Supply management is here to stay,” the bank said.

Oil slides on rising US crude stockpiles, Saudi vow to keep market balanced

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Reuters

KEY POINTS
  • Brent crude futures were down 38 cents, or 0.5 percent, at $71.80 at barrel by 0219 GMT, having risen 21 cents on Tuesday.
  • U.S. West Texas Intermediate (WTI) crude futures for July delivery were down 58 cents, or 0.9 percent, at $62.55. The June contract expired on Tuesday, settling at $62.99 a barrel, down 11 cents.
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Oil prices fell on Wednesday after industry data showed an increase in U.S.crude inventories and as Saudi Arabia pledged to keep markets balanced.

Brent crude futures were down 38 cents, or 0.5 percent, at $71.80 at barrel by 0219 GMT, having risen 21 cents on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures for July delivery were down 58 cents, or 0.9 percent, at $62.55. The June contract expired on Tuesday, settling at $62.99 a barrel, down 11 cents.

The American Petroleum Institute (API) said on Tuesday that U.S. crude stockpiles rose by 2.4 million barrels last week, to 480.2 million barrels, compared with analysts’ expectations for a decrease of 599,000 barrels.

Official data from the U.S Energy Information Administration’s oil stockpiles report is due later on Wednesday.

Outside the United States, Saudi Arabia on Wednesday said it was committed to a balanced and sustainable oil market.

Saudi Arabia has been at the forefront of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), of which the kingdom is the de-facto leader, which started in January and are aimed at reducing global oversupply that emerged in 2018.

Because of the cuts, Bank of America Merrill Lynch said crude output by OPEC and its allies fell by 2.3 million barrels per day (bpd) between November 2018 and April 2019. That has helped push up Brent crude prices by more than a third since the start of the year.

The bank said some of the cuts’ impact was offset by a slowdown in global oil demand growth due to trade tensions to just 0.7 million bpd in the fourth quarter of 2018 and the first quarter of this year, versus a five-year average of 1.5 million bpd.

Beyond market fundamentals, oil traders are eying the tensions between the United States and Iran.

U.S. President Donald Trump on Monday threatened Iran with “great force” if it attacked U.S. interests in the Middle East.

On Tuesday, acting U.S. Defense Secretary Patrick Shanahan said threats from Iran remained high.

Tensions have risen since Trump re-imposed sanctions on Iranian oil exports to try to strangle the country’s economy and force Tehran to halt its nuclear program.

Oil prices fall on surging US crude supply, economic slowdown

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures were at $71.44 per barrel at 0424 GMT, down 29 cents, or 0.4 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $64.28 per barrel, down 33 cents, or 0.5 percent, from their previous settlement.
RT: Oil Russia Bashneft company 150128
Sergei Karpukhin | Reuters

Oil prices fell on Thursday, pressured as U.S. crude stockpiles surged to their highest levels in almost 17 months amid record production and as economic concerns cast doubt over growth in demand for fuel.

International benchmark Brent futures were at $71.44 per barrel at 0424 GMT, down 29 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $64.28 per barrel, down 33 cents, or 0.5 percent, from their previous settlement.

U.S. crude inventories rose 7 million barrels to 456.6 million barrels in the last week, their highest since November 2017, the Energy Information Administration said on Wednesday.

U.S. crude oil production remained at a record 12.2 million barrels per day (bpd), making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

There are also concerns that an economic slowdown will soon dent fuel consumption after the International Monetary Fund this week downgraded its global growth forecast to the lowest in a decade.

Despite the surge in U.S. supply and the economic concerns, global oil markets remain tight amid supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), U.S. sanctions on oil exporters Iran and Venezuela, and escalating fighting in Libya.

”(Oil markets will remain tight) as long as Saudi Arabia continues to back the production cut deal as aggressively as it has done so far,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Brent and WTI have risen by around 30 and 40 percent respectively since the start of the year.

“Pressure to global supplies continues to mount because of sanctions-linked problems in Iran and Venezuela and rising geopolitical risk in Libya,” said Stephen Innes, head of trading at SPI Asset Management.

Beyond the short-term outlook for oil markets, a lot of attention is on the future of demand amid the rise of alternative fuels for transport.

“We believe global demand has another 10 million barrels bpd of growth, with over half from China,” Bernstein Energy said in a note on Thursday.

Current oil demand stands around 100 million bpd.

Bernstein said it expected oil demand to peak around 2030, but added that “we expect a long plateau rather than a sharp decline” in consumption after that.

“While no industry lasts forever, the age of oil is far from over,” Bernstein said.