Oil prices dip on weak demand outlook, supply concerns

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Reuters
KEY POINTS
  • Global benchmark Brent crude oil futures fell by 10 cents, or 0.2%, to $59.32 a barrel by 0108 GMT.
  • U.S. crude oil crude oil futures were down by 9 cents, or 0.2%, to $53.69.
GP: Aramco oil facility Saudi Arabia 190719
Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices eased on Monday amid persistent concerns about the global economic outlook and the impact on oil demand, while Russia again missed its target to cut oil output last month.

Global benchmark Brent crude oil futures fell by 10 cents, or 0.2%, to $59.32 a barrel by 0108 GMT.

U.S. crude oil crude oil futures were down by 9 cents, or 0.2%, to $53.69.

“Commodity markets continue to struggle amid weak economic data,” said ANX Bank in a note.

China’s economic growth slowed to 6% year-on-year in the third quarter, its weakest in 27-1/2 years and short of expectations due to soft factory production and continuing trade tensions.

Still, a 9.4% year on year increase in China’s refinery throughput for September signaled that petroleum demand from the world’s biggest oil importer remained robust.

On the supply side, Russia said on Sunday it produced more oil in September than envisaged by a global deal due to an increase in gas condensate output as the country prepared for winter.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other oil producers, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million barrels per day (bpd) from the start of this year.

But several countries, including OPEC kingpin Saudi Arabia, have complained about Russia’s failure to comply with the deal in full.

Talks between OPEC members Kuwait and Saudi Arabia to restart oil production from jointly-operated fields in the 500,000 bpd Neutral Zone added to concerns of rising supplies.

Kuwait’s deputy foreign minister on Saturday said negotiations were “very positive” after Kuwaiti media, citing unidentified sources, said the two Gulf oil producers had agreed to resume crude output from oilfields in the Saudi-Kuwaiti divided zone.

“Those extra barrels will come to market at a most unwelcome time,” said Stephen Innes, market strategist at AxiTrader referring to crude oil production from the Neutral Zone.

US crude rises 1.9%, settling at $47.96, as trade talks and supply cuts boost oil prices

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  • Oil prices rise after China said it would hold trade talks with the United States.
  • Crude futures extend gains as the stock market rallies on a strong U.S. jobs report and supportive comments from the Federal Reserve chair.
  • The Energy Information Administration reports U.S. crude stocks were little changed last week, but gasoline and distillate inventories rose sharply.

174362712AB024_OIL_BOOM_SHI

Andrew Burton | Getty Images

Oil prices rose on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown, but gains were capped after the United States reported a sharp build in refined product inventories.

Brent crude, the global benchmark, rose $1.11, or 2 percent, to $57.06 a barrel. ET. U.S. crude oil ended Friday’s session up 87 cents, or 1.9 percent, at $47.96.

After both benchmarks fell sharply last year, prices were on track for solid gains in the first week of 2019, despite recent data that added to concerns about a slowing global economy.

Brent increased about 9 percent for the week, while WTI rose by nearly 6 percent.

Prices pared gains on Friday after data from the U.S. Energy Information Administration showed a sharp increase in product inventories as refiners ramped up utilization rates to 97.2 percent of capacity, the highest rate on record for this time of year.

We want to see crude oil above $50, says equity strategist

We want to see crude oil above $50, says equity strategist  

Gasoline stocks rose 6.9 million barrels last week, while distillate stockpiles grew 9.5 million barrels, the EIA said, compared with forecasts for builds under 2 million barrels. U.S. crude stockpiles were little changed.

“The big build in products has really caught everyone by surprise again,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “The gasoline number was a little bit disappointing because demand was soft and we saw a big build in supply.”

U.S. energy firms cut oil rigs for the first time in three weeks as producers started to reduce their 2019 drilling plans with the collapse in crude prices at the end of last year. Drillers cut eight oil rigs in the week to Jan. 4, bringing the total count down to 877, General Electric‘s Baker Hughes energy services firm said in its closely followed report on Friday.

Oil drew support from comments by China’s commerce ministry, which said Beijing would hold vice-ministerial trade talks with U.S. counterparts on Jan. 7-8. The news helped boost sentiment across riskier assets including the U.S. equity and oil markets.

Washington and Beijing have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and hampering growth.

China’s services sector extended its expansion in December, a private survey showed on Friday, bucking a trend of downbeat economic data.

Frost & Sullivan sees oil prices recovering in 2019

Frost & Sullivan sees oil prices recovering in 2019  

A survey from the Institute for Supply Management on Thursday showed U.S. factory activity slowed more than expected in December, and leading economies in Asia and Europe have reported a fall in manufacturing activity.

A robust U.S. jobs report also added to broader market optimism.

Despite some demand-side worries, oil has received support as supply cuts announced by the global coalition of producers known as OPEC+ kick in.

OPEC, Russia and other non-members agreed in December to reduce supply by 1.2 million barrels per day (bpd) in 2019. OPEC’s share of that cut is 800,000 bpd. A Reuters survey on Thursday found OPEC supply fell by 460,000 bpd in December.

The focus now will be on whether producers deliver further curbs in January to implement the deal fully. Iraq said on Friday it was committed to the deal and would keep its oil production at 4.513 million bpd for the first half of 2019.

Oil prices fall on relentless rise in US crude output

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  • U.S. crude oil production soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.
  • U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency.

Rig supervisor David Crow shows off the oil rig he manages for Elevation Resources at the Permian Basin drilling site in Andrews County, Texas, May 16, 2016.

Ann Saphir | Reuters

Oil prices fell on Tuesday, extending losses from the previous session, as the inexorable rise in U.S. crude output weighed on markets.

U.S. West Texas Intermediate (WTI) crude futures were at $61.25 a barrel at 0414 GMT, down 11 cents, or 0.2 percent, from their previous close.

Brent crude futures were at $64.85 per barrel, down 10 cents, or 0.2 percent.

Both crude benchmarks dropped by around 1 percent in their Monday sessions.

“Oil prices fell on the back of concerns that surging U.S. production … could push inventories in the U.S. higher,” ANZ bank said on Tuesday.

U.S. crude oil production soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.

U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).

The rising U.S. output comes largely on the back of onshore shale oil production.

U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.

“Oil prices moved lower … after (the) Energy Information Administration published a report that crude production from seven major U.S. shale plays is expected to see a climb,” said Stephen Innes, head of trading for Asia Pacific at futures brokerage OANDA in Singapore.

That expected increase would top the 105,000 bpd climb in March from the previous month, to what was then expected to be a record high of 6.82 million bpd, the EIA said.

The EIA is due to publish its latest weekly U.S. production data on Wednesday.

COLUMN-U.S. crude oil exports to Asia soar, complicating OPEC’s efforts: Russell

November 13, 2017 / 4:17 AM / Google Alerts

(The opinions expressed here are those of the author, a columnist for Reuters.)

By Clyde Russell

LAUNCESTON, Australia, Nov 13 (Reuters) – U.S. crude oil is flooding into Asia, and may continue to do so as the arbitrage window that was initially created by Hurricane Harvey remains open, even though the disruption from the costliest storm to hit the Gulf of Mexico has faded.A record amount of U.S. crude is scheduled to arrive in Asia in November, according to vessel-tracking and port data compiled by Thomson Reuters Oil Research and Forecasts.

The data show 19.7 million barrels of U.S. oil is due to arrive across Asia in November, equivalent to about 657,000 barrels per day (bpd). The data are filtered to show only vessels that are currently underway, and those that are discharging or have discharged their cargoes.

This is more than a 50 percent jump on the 427,000 bpd that was offloaded in Asia in October, and also above the previous record-high month for U.S. crude shipments to Asia of 541,000 bpd from June.

It also appears that December will be another month of strength, with 11 vessels carrying a combined 16.5 million barrels of crude already en route from U.S. Gulf ports to Asia.

When Hurricane Harvey struck the U.S. Gulf coast in late August one of the initial impacts was a drop in the price of West Texas Intermediate (WTI), the main U.S. light crude grade.

At that time it became likely that U.S. exports to Asia would ramp up given that WTI’s discount to the global benchmark light crude, Brent, widened to $5.46 a barrel at closing prices on Aug. 29.

This was enough of a gap to overcome the higher freight rate to ship from the Gulf coast to Asia, compared to similar grades of crude from African producers such as Angola and Nigeria.

WTI’s discount to Brent had been just $2.48 a barrel at the end of July, which made it harder to make a profit shipping U.S. crude to Asia.

But instead of narrowing back as refineries recovered along the U.S. Gulf coast after Harvey and started processing crude again, WTI’s discount to Brent has remained at elevated levels.

At the close of Nov. 10, Brent commanded a $6.78 premium over WTI, which is even higher than what it was in the immediate aftermath of Harvey.

This makes it likely that U.S. crude will continue to flow to Asia at robust levels, as the discount provides a profitable trade for U.S. shale drillers and other oil producers.

CHANGING MARKET DYNAMICS

While the volumes aren’t enough to threaten the position of Asia’s major suppliers, such as OPEC heavyweights Saudi Arabia, Iran and Iraq, as well as Russia, it is enough to complicate the efforts of OPEC and its allies to re-balance crude oil markets and send prices sustainably higher.

For example, China, the world’s top crude importer, has been ramping up purchases from the United States, taking the equivalent of about 127,000 bpd of U.S. crude in the first nine months of the year.

While this makes the United States only China’s 15th biggest supplier, it represents a staggering 880 percent increase on the same period in 2016.

Other non-traditional suppliers to China have also been making inroads as OPEC and its allies acted to curb output.

Imports from Malaysia are up 500 percent, those from Britain by 95 percent and from the Republic of Congo by 459 percent.

In contrast, former top supplier Saudi Arabia has seen a drop of 0.6 percent in the first nine months of the year compared to the same period in 2016.

China’s imports from Iran are up by a modest 4.2 percent, while those from Iraq are 5.8 percent higher, both figures well below the overall increase of 12.2 percent in crude imports in the first three quarters of the year.

What the Chinese customs and the vessel-tracking data show is that the ongoing discount of WTI to Brent, coupled with the output restrictions by OPEC and its allies, are creating new market dynamics in Asia.

The problem for OPEC and other major crude suppliers to the world’s top importing region is that once market share is surrendered, it may prove difficult to win back.

Editing by Joseph Radford