Oil prices fall further on virus fears, U.S. crude stock build

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.7%, to $37.75 per barrel at 0245 GMT on Thursday, after dropping $2.36 on Wednesday.
  • Brent crude futures fell 30 cents, or 0.7%, to $40.01 per barrel after falling $2.32 on Wednesday.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices slipped on Thursday, extending losses of more than 5% in the previous session, weighed down by record high U.S. crude inventories and worries that a rapid resurgence in Covid-19 cases could choke a revival in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.7%, to $37.75 per barrel at 0245 GMT on Thursday, after dropping $2.36 on Wednesday.

Brent crude futures fell 30 cents, or 0.7%, to $40.01 per barrel after falling $2.32 on Wednesday. A day earlier, the benchmark contract hit its highest price since early March, just before pandemic lockdowns and a Saudi-Russian price war slammed markets.

Wednesday’s selloff came after U.S. government data showed crude stockpiles rose by 1.4 million barrels, driving inventories to a record high for a third straight week last week.

Analysts, however, said that was mostly due to a flotilla of Saudi cargoes booked by U.S. refiners when prices slumped in March. Those shipments are due to ease soon.

Worries about a second wave of Covid-19 cases in several U.S. states, where lockdowns had eased, and a rapid spread of infections in South America and South

Asia are expected to keep a lid on fuel demand, market watchers said.

“The latest trends there are not encouraging,” said National Australia Bank’s head of commodity research, Lachlan Shaw.

The fear is that even if lockdowns are eased, people will stay home because of the perceived health risks.

Stephen Innes, market strategist at AxiCorp, said mobility data from Google showed driving in Texas, Florida and to a certain extent California was flatlining.

In another reminder of fuel demand woes, Australia’s flagship airline, Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.

“It highlights the reality that we’re talking years before international aviation recovers — probably three to four years,” Shaw said.

Oil rises on signs of firmer demand, fall in U.S. crude stocks

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Reuters
KEY POINTS
  • Brent crude futures for July delivery were up 23 cents, or 0.7%, at $34.88 per barrel at 0347 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures for July were up 14 cents, or 0.4%, at $32.10 a barrel.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
An offshore oil platform is seen with a tanker in the distance on April 20, 2020 in Huntington Beach, California.
Michael Heiman | Getty Images

Oil prices rose on Wednesday amid signs of improving demand and a drawdown in U.S. crude inventories but worries over the economic fallout from the coronavirus pandemic capped gains.

Brent crude futures for July delivery were up 23 cents, or 0.7%, at $34.88 per barrel at 0347 GMT.

U.S. West Texas Intermediate (WTI) crude futures for July were up 14 cents, or 0.4%, at $32.10 a barrel. The July contract closed on Tuesday at $31.96, up 1%.

The June contract expired on Tuesday at $32.50 a barrel, up 2.1%, as the WTI futures market avoided the chaos of last month’s May expiry, when prices sank below zero.

Oil prices have mainly risen during the past three weeks, with both benchmarks climbing above $30 for the first time in more than a month on Monday, supported by massive output cuts by major oil producing countries and signs of improving demand.

U.S. crude inventories fell by 4.8 million barrels to 521.3 million barrels in the week to May 15, data from industry group the American Petroleum Institute (API) showed on Tuesday.

Refinery runs rose by 229,000 barrels per day, the API said, a sign that plants are trying to produce more fuel as the United States eases its lockdowns put in place to halt the spread of the novel coronavirus.

Official data from the Energy Information Administration (EIA) is due at 10:30 a.m. (1430 GMT) on Wednesday.

“Oil markets have worried about high crude inventories but yesterday the WTI June contract expired and rolled over to July smoothly as concerns over crude stocks ease and demand has improved in the short-term,” said Kim Kwang-rae, commodity analyst at Samsung Securities in Seoul.

Asia’s gasoline profit margins turned positive on Tuesday for the first in nearly two months, giving hope to global oil refiners.

But lingering concerns about the economic fallout from the coronavirus pandemic, especially in the United States which is the world’s biggest oil consumer, kept a lid on prices.

U.S. Federal Reserve Chair Jerome Powell said on Tuesday layoffs by state and local governments will slow the U.S. economic recovery, while Boston Federal Reserve Bank President Eric Rosengren said the U.S. unemployment rate is likely to stay at double-digit levels through the end of the year.

Oil prices inch higher on US stockpile drop, but bleak outlook caps gains

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Reuters
KEY POINTS
  • Brent crude futures were up 6 cents, or 0.2%, at $29.25 per barrel at 0401 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.7%, to $25.47 a barrel.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices were lifted on Thursday by an unexpected drop in U.S. crude stocks, but gains were capped by both a bleak outlook for the world’s no. 1 economy as the coronavirus pandemic crushes fuel demand and concern over a potential second wave of cases.

Brent crude futures were up 6 cents, or 0.2%, at $29.25 per barrel at 0401 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.7%, to $25.47 a barrel.

Prices have risen in the past two weeks as some countries relaxed coronavirus restrictions and lockdowns to allow factories and shops to open again. But new cases have emerged in South Korea and China, raising concerns over a possible second wave of infections which would weigh on economic recovery and fuel demand.

U.S. Federal Reserve Chairman Jerome Powell warned on Wednesday of an “extended period” of weak economic growth and called for additional fiscal spending to stave off the fallout from the virus.

“It is hard to get excited about a steady rebound for crude demand when the world’s largest economy has significant uncertainty about the outlook and big downside risks,” said Edward Moya, senior market analyst at OANDA.

A drop in U.S. crude inventories provided some support to prices early in the trading session, but Moya said much bigger drawdowns over the next few weeks would be needed to boost prices.

U.S. crude inventories fell by 745,000 barrels to 531.5 million barrels in the week to May 8, marking the first decline since January, the Energy Information Administration said on Wednesday. Analysts in a Reuters poll had forecast a 4.1 million barrel increase.

Amid the slump in fuel use, the Organization of Petroleum Exporting Countries (OPEC) said on Wednesday it expects 2020 global oil demand to shrink by 9.07 million bpd, worse than its previous contraction forecast of 6.85 million bpd. It said it also expected the second quarter to see the steepest decline in demand.

ING Economics said in a note the lowering of demand forecasts made for “bearing reading”.

”(Second-quarter) demand for OPEC oil is just 16.77 million bpd, well below OPEC output levels, even when full compliance of OPEC+ cuts are taken into consideration,” ING added.

OPEC+, a grouping of OPEC and other producers including Russia, agreed in April to curtail production by 9.7 million barrels per day (bpd) in May and June. Saudi Arabia, de facto leader of OPEC, also said it would cut its own output by an additional 1 million bpd to 7.5 million bpd starting in June.

Oil prices wilt on surprise build-up in US crude stocks

CNBC

Reuters
KEY POINTS
  • Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT.
  • U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.
GP: Oil tank North Dakota 190926
A photo taken on August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices fell on Wednesday after industry data showed an unexpected build in crude inventory in the United States and as investors waited for news on whether a fresh round of U.S. tariffs on Chinese goods would take effect on Sunday.

Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT. U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.

“At this time, everyone was expecting we would have strong draws in the inventory, but it was a build,” said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp.

U.S. crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.

Crude inventories rose by 1.4 million barrels in the week to Dec. 6 to 447 million, while analysts were expecting a fall of 2.8 million barrels.

The weekly EIA report is due later on Wednesday.

U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching fast.

With the market expected to be over-supplied next year on growing shale oil output and new projects coming on stream, any additional tariffs will dent demand and, in turn, prices, said Mitsubishi’s Nunan.

“The big question is how will the demand hold up?” he said.

“The demand slowdown in growth, a lot of it seems to be coming from the (U.S.-China) trade war. If tariffs go into effect, sentiments will turn bearish again.”

The U.S. is on track to become a net exporter of crude and fuel for the first time on record on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.

Also adding to global supply, U.S. producers Exxon Mobil and Hess plan to export the first-ever shipments of crude oil from Guyana between January and February, a milestone for Latin America’s newest oil producer, sources with knowledge of the plans said.

Elsewhere, Venezuela’s crude output in November jumped more than 20% from the prior month to the highest level since the United States tightened sanctions on state oil company PDVSA in August, two people with knowledge of PDVSA data said this week.

Investors are also eyeing other major events this week including the British election on Thursday and U.S. and European Central Bank meetings for further trading cues.

US oil edges up after 3 percent drop on big stock build

CNBC

  • U.S. crude stocks increased by 6.5 million barrels in the previous week, the surge was the fourth straight weekly build and almost triple of what analysts had forecast, according to the U.S. Energy Information Administration.

Oil inched up on Thursday amid ongoing tensions over the death of a prominent Saudi journalist, with prices steadying after a big drop overnight due to a jump in U.S. crude stockpiles.

U.S. West Texas Intermediate crude for October delivery was up 12 cents, or 0.2 percent, at $69.87 a barrel by 0413 GMT, after falling 3 percent in the previous session to settle below $70 for the first time in a month.

Front-month London Brent crude for December delivery was up 13 cents, or 0.2 percent, at $80.18, having ended down 1.7 percent.

U.S. crude stocks rose 6.5 million barrels last week, the U.S. Energy Information Administration said on Wednesday, the fourth straight weekly build and almost triple what analysts had forecast.

“The impact of the inventory-jump weighed on the market and oil seems bearish,” said Kaname Gokon, a trader in Japan.

“The United States may have to go ahead with sanctions on Saudi Arabia, which could push prices higher, but Russia and other producers are set to increase supplies.”

Inventories rose sharply even as U.S. crude production slipped 300,000 barrels per day (bpd) to 10.9 million bpd last week due to the effects of offshore facilities closing temporarily for Hurricane Michael.

U.S. lawmakers pointed the finger at the Saudi leadership over the disappearance of prominent Saudi critic and journalist Jamal Khashoggi, suggesting sanctions could be possible.

Saudi Arabia denies that it had any role in Khashoggi’s disappearance.

Western pressure mounted on Riyadh to provide answers, but comments by President Donald Trump suggested the White House may not take additional action against the Saudis, particularly after Saudi Arabia said it will conduct an investigation.

Investors worry Saudi Arabia could use oil supply to retaliate against critics. But Saudi Arabia has assured OPEC that it is “committed, capable and willing” to ensure there will be no shortage in the oil market, OPEC’s secretary-general said on Wednesday.

Saudi Arabia and Kuwait will struggle to resume oil production from jointly operated fields that produced some 500,000 bpd any time soon due to operational differences and souring political ties, sources said on Wednesday.

Signs that Iranian oil exports have been falling more steeply than some in the market expected amid looming U.S. sanctions have underpinned the oil market.