Oil prices mixed after edging up from two-week lows; set for weekly drop

CNBC

  • U.S. oil prices were mixed on Friday, after three days of declines.
  • Gains were limited as Asian share markets extended a selloff on Wall Street after news of planned U.S. tariffs on steel and aluminium.

U.S. oil prices were mixed on Friday, after three days of declines, but any gains were limited as Asian share markets extended a selloff on Wall Street after news of planned U.S. tariffs on steel and aluminium raised fears of a trade war.

President Donald Trump announced he would impose hefty tariffs on the two metals to protect U.S. producers, risking retaliation from major trade partners like China, Europe and neighboring Canada.

U.S. West Texas Intermediate (WTI) crude was down 1 cent at $60.98 by 0432 GMT after touching a two-week low of $60.18 a day earlier.

Global benchmark Brent was up 7 cents, or 0.1 percent, at $63.90 a barrel, after settled down 1.4 percent on Thursday, also a two-week low. Brent is set for a weekly fall of 5.1 percent.

U.S. crude is on track for a 4 percent drop this week, its first weekly decline in three, having given up much of the gains in recent weeks when sentiment was boosted by a fall in inventories at the Cushing delivery point for WTI.

Oil and gas sectors drop on steel and aluminum tariff news  

“The market is not showing any obvious signs of turning around the mood. We are being driven by the pick up in U.S. inventories and in general terms the market went a bit to far too soon,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Then we have the volatility in the U.S. dollar and the implications of the tariff news to factor in,” he said.

U.S. crude stocks rose last week even as refineries hiked output, increasing by 3 million barrels, compared with expectations for an increase of 2.1 million barrels.

Still, stocks fell again at Cushing in Oklahoma, with inventories down by 1.2 million barrels, the 10th consecutive week of declines, the Energy Information Administration said this week.

“Although destocking in Cushing has continued, with stocks there falling below 30 million barrels for the first time since late 2014, the overall increase in U.S. oil stocks has overshadowed the good news,” Fawad Razaqzada, market analyst at Forex.com, said in a note.

The Organization of the Petroleum Exporting Countries (OPEC) will hold a dinner on Monday in Houston with U.S. shale firms, the latest sign of the producer group widening talks about how best to tame a global oil glut.

U.S. crude output slipped in the last month of 2017, but in November hit an all-time high of 10.057 million barrels per day (bpd). Weekly data showed another record and further gains are expected.

US crude rises 34 cents, settling at $61.68, breaking two-week losing streak with 4.2% gain

CNBC

  • U.S. crude stabilized on Friday as the dollar slipped to a three-year low and equities were on pace for their biggest weekly gain in six years.
  • Supportive comments from OPEC members about the cartel’s output cuts also boosted sentiment.
  • However, surging U.S. production is offsetting those efforts. U.S. crude output hit a record 10.27 million bpd last week.

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil prices stood near a one-week high on Friday as global equities headed for their biggest weekly gain in six years as the dollar slipped to a three-year low.

U.S. West Texas Intermediate crude for March delivery ended Friday’s session up 34 cents at $61.68 a barrel. For the week, the U.S. crude contract rose 4.2 percent after losing nearly 10 percent last week.

London Brent crude rose 37 cents to $64.70 by 2:03 p.m. ET, on track for a roughly 3-percent weekly gain after falling more than 8 percent last week.

“Oil is getting support from a rebound in global stock markets and a weak dollar, but the upside is limited due to a projection for rising U.S. production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

Commodities tomorrow:

Commodities tomorrow: Crude finds $60 ‘sweet spot’  

The dollar slipped to a three-year low against a basket of currencies on Friday but later regained some ground. A weaker dollar often boosts oil and other dollar-denominated commodities.

World shares were set to post their best week of gains in six years after two consecutive weeks in the red. Activity was subdued as many Asian markets were closed for the Lunar New Year holiday.

Also supporting oil prices was a statement from the United Arab Emirates energy minister late on Thursday saying oil producers led by Saudi Arabia and Russia aimed to draft an agreement on a long-term alliance by the year end.

OPEC and some non-OPEC producers including Russia have been restraining production by 1.8 million barrels per day (bpd) to prop up prices. The arrangement expires at the end of 2018.

The move comes at a time when Asian demand is on the rise.

India imported a record 4.93 million bpd in January to feed its expanded refining capacity and meet rising demand, data showed.

Here's where oil prices are headed next: Oil analyst

Here’s where oil prices are headed next: Oil analyst  

Oil won support earlier in the week after Saudi Energy Minister Khalid al-Falih said OPEC hopes to keep limiting crude output to leave the market tight.

However, surging U.S. production is offsetting those efforts. U.S. crude output hit a record 10.27 million bpd last week, the Energy Information Administration said on Wednesday. The United States is now a bigger producer than Saudi Arabia.

U.S. drillers added 7 oil rigs in the latest national count kept by oilfield services firm Baker Hughes. The count has risen by 51 oil rigs in the last four weeks, putting the total at a nearly three-year high of 798.

“Drilling activity in the U.S. continues to pick up … Adding to this, producers appear to be more efficient than they were mid last year,” ING said in a note, adding that rising U.S. supplies and the liquidation of speculative longs were likely to keep oil prices under pressure.

— CNBC’s Tom DiChristopher contributed to this report.

Oil gains as dollar sags near 3-year low; many Asian markets shut

CNBC

  • The U.S. crude contract has risen nearly 4 percent this week after losing nearly 10 percent last week.

Oil prices edged higher on Friday as the dollar stood near a three-year low in subdued Asian trade, with many markets closed for the Lunar New Year holiday.
Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

U.S. crude for March delivery was up 16 cents, or 0.3 percent, at $61.50 a barrel by 0200 GMT, after settling up 74 cents on Thursday. For the week, the contract has risen nearly 4 percent after losing nearly 10 percent last week.

Brent crude was up 26 cents, or 0.4 percent, at $64.59 after settling down 3 cents. Brent is up nearly 3 percent for the week after falling more than 8 percent last week.

“Oil is getting support from a rebound in global stock markets and a weak dollar, but the upside is limited due to a projection for rising U.S. production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “The market is quiet due to a slew of holidays in Asia.”

The dollar languished near a three-year low against a basket of currencies on Friday, headed for its biggest weekly loss in two years. A weaker dollar often boosts prices for oil and other dollar-denominated commodities.

Asian shares extended their recovery from two-month lows into a fifth day on Friday as Wall Street’s market volatility gauge fell, although Chinese and most Southeast Asian financial markets were closed for the Lunar New Year holiday.

Here's where oil prices are headed next: Oil analyst

Here’s where oil prices are headed next: Oil analyst  

Oil producers led by Saudi Arabia and Russia aim to draft an agreement on a long-term alliance by the end of this year, United Arab Emiratesenergy minister Suhail al-Mazroui said on Thursday. OPEC and non-OPEC producers including Russia have been restraining production by a total 1.8 million barrels per day in a bid to prop up prices under a deal that is to expire at the end of 2018.

The move comes at a time when Asian demand is on the rise. Indiaimported a record 4.93 million bpd in January to feed its expanded refining capacity and meet rising demand, data showed.

Oil won support earlier in the week after Saudi Energy Minister Khalid al-Falih said OPEC hopes to keep limiting crude output to leave the market tight.

However, surging U.S. production is offsetting OPEC’s efforts to curb supplies. U.S. crude output hit a record 10.27 million barrels per day last week, the Energy Information Administration (EIA) said on Wednesday, making it a bigger producer than Saudi Arabia.

Oil prices steady as high US output offsets report of lower crude stockpiles

CNBC

  • Industry group the American Petroleum Institute says U.S. crude inventories fell by 1.1 million barrels, ahead of official government figures.
  • Oil prices are on pace for a second weekly decline following a two-day equity sell-off and as volatility returns to financial markets.
  • Climbing U.S. production looms over the market as the U.S. Energy Information Administration forecasts American output to average 10.6 million barrels a day this year.

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 were broadly steady on Wednesday, as the boost from a report showing a drop in U.S. crude inventories last week was offset by evidence of soaring U.S. output.

Brent crude futures edged up 11 cents to $66.97 a barrel by 9:13 a.m. ET (1413 GMT). The contract is 2.7 percent for the week.

U.S. West Texas Intermediate (WTI) crude futures eased 13 cents to $63.26 a barrel, down 3.6 percent so far this week.

Global equities recovered modestly after their largest one-day fall in nearly two years on Monday, when volatility surged and investors ditched stocks and bonds.

Some oil majors starting to increase spending, analyst says  

“The risk-off move impacted oil, but that impact has been limited because commodities are consumption or real assets, as opposed to equities or bonds, which are investment assets,” BNP Paribas head of commodity strategy Harry Tchilinguirian said.

“The curve pays you for being long oil,” he said, adding the main issue affecting oil prices was “the efforts of supply restraint by producers that in the second half of 2017 started to bear fruit.”

The Organization of the Petroleum Exporting Countries and other producers, including Russia, have cut production since last January to force down global inventories.

Crude inventories in the United States have fallen by 20 percent since hitting record highs in April 2017.

The futures curve shows prompt prices for oil are above those for future delivery, suggesting investors are counting on demand outpacing supply.

Data on Tuesday showed U.S. crude inventories fell by 1.1 million barrels in the week to Feb. 2 to 418.4 million barrels, helping support the oil price.

Commodities tomorrow:

Commodities tomorrow: Crude holds tight range on the day  

“Evidence points to a global inventory market that has arguably already balanced – with days of forward cover in the low single digits or possibly even lower – which should support the spot price going forward,” said Richard Robinson, manager of the Ashburton Global Energy fund.

But rising U.S. oil production has been looming over the market. Output has risen by 1 million barrels per day in the last year to about 10 million bpd.

The U.S. Energy Information Administration (EIA) expects U.S. output to reach an average of 10.59 million bpd in 2018 and 11.18 million bpd by 2019, potentially overtaking Russia as the world’s largest producer.

“The strong growth that is expected in U.S. production supports our more bearish outlook for the oil market,” Hamza Khan, head of ING commodities strategy, said in a note.

Brent oil hits $71 for 1st time since 2014 as dollar drops, US stocks decline

CNBC

  • Brent oil prices hit $71 per barrel on Thursday for the first time since 2014
  • Prices were pushed higher after U.S. crude inventories posted a 10th straight week of declines
  • Price support has also been coming from supply restrictions led by a group of producers around OPEC and Russia

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.

Brent oil prices hit $71 per barrel on Thursday for the first time since 2014 as the dollar continued to weaken and crude inventories in the United States fell for a 10th straight week amid ongoing supply cutbacks by OPEC and top producer Russia.

Brent crude futures, the international benchmark for oil prices, hit a session high of $71.05 per barrel – the highest since early December 2014 – before dipping back to $70.99 by 0440 GMT. That was still up 46 cents, or 0.7 percent from the last close.

U.S. West Texas Intermediate (WTI) crude futures climbed to $66.35 per barrel, also the highest level since early December 2014, before dipping to $66.26. That was still up 1 percent from the last settlement.

Both crude benchmarks have risen by almost 60 percent since the middle of last year.

Price have been supported by supply restrictions led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, the world’s biggest oil producer, which started last year and are set to last throughout 2018.

“That (the producer cuts), the U.S.-dollar fall, along with another inventory draw combined to drive (crude) up,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

U.S. crude inventories fell 1.1 million barrels in the week to Jan. 19, to 411.58 million barrels, the Energy Information Administration (EIA) said on Wednesday.

That is the lowest seasonal level since 2015 and below the five-year averageof about 420 million barrels.

Oil hits 3-year high

Oil hits three-year high  

In foreign exchange markets, the U.S. dollar hit its lowest level since December 2014 against a basket of other leading currencies.

A weakening dollar often results in financial traders taking investments out of currency markets and into commodity futures like crude.

Oil fuels inflation

Fereidun Fesheraki, chairman of consultancy FACTS Global Energy, told Reuters in Tokyo on Thursday that oil prices could rise further still.

“The market is so tight… The problem with this environment is that if you have something in say, Libya, and production goes down by 500,000 barrels (per day)… it (Brent) can easily go to $75 by May,” he said.

Analysts said that rising oil prices would likely start to have an inflationary effect.

“Higher oil prices will eventually be reflected in higher consumer prices as the costs of transport of most goods will rise,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Looming over the generally bullish oil market has been U.S. oil production,which is edging ever more closely towards 10 million barrels per day (bpd), rising to 9.88 million bpd last week.

U.S. output has grown by more than 17 percent since mid-2016, and is now on par with that of top exporter Saudi Arabia.

Only Russia produces more, averaging 10.98 million bpd in 2017.

Oil prices hold near 2015 highs, but doubts over rally emerge

CNBC

  • Brent has risen by more than 10 pct since December
  • Oil has been supported by OPEC-led cuts, strong economic growth
  • Tensions in OPEC-member Iran have also lifted oil prices
  • But soaring U.S. crude production could undermine rally

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 held firm on Friday, with Brent crude up by more than 10 percent from its December lows on the back of political tensions in OPEC-member Iran and a tightening U.S. market.

U.S. West Texas Intermediate (WTI) crude futures were at $61.95 a barrel at 0151 GMT, 5 cents below their last close but not far off the $62.21 May 2015 high reached the previous day.

Brent crude futures were at $68.03 a barrel, 4 cents below their last settlement, but not far off the $68.27 high from the day before, also the highest since May 2015.

Beyond a brief intraday spike in May 2015, these were the highest price levels since December 2014, during the oil price downturn.

Traders said political tensions in oil producing Iran were supporting prices.

Oil prices to drop by Oscar season, OPIS' Tom Kloza warns

Oil prices to drop by Oscar season, OPIS’ Tom Kloza warns  

“The protests in Iran add more fuel to the already bullish oil market mood,” said Norbert Ruecker, head of commodity research at Swiss Bank Julius Baer.

Oil prices have been supported by production cuts led by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) and by Russia, which started in January last year and are set to last through 2018, as well as by strong economic growth and financial markets.

This has helped tighten markets. U.S. Commercial crude inventories fell by 7.4 million barrels in the week to Dec. 29, to 424.46 million barrels, according to data from the Energy Information Administration (EIA).

That’s down 20 percent from their historic peaks last March and close to the five-year average of 420 million barrels.

Can the bull-run last?

Given that Iran’s oil production has not been affected by the unrest, and that U.S. production will likely break through 10 million barrels per day (bpd) soon, a level so far only reached by Saudi Arabia and Russia, doubts are emerging whether the bull-run can last.

“Prices above $60 per barrel project an overly rosy picture, so we see near-term downside,” Ruecker warned.

“Oil production disruptions (in Iran) remain a very distant threat …Disruptions in the North Sea have been removed with the Forties Pipeline system having resumed full operations. U.S. oil production surpassed the 2015 highs in October and is set to climb to historic highs this year,” he said.

Lukman Otunuga, analyst at futures brokerage FXTM, struck a similarly cautious tone.

“Oil started the New Year on an incredibly bullish note … in part due to ongoing tensions in Iran … (and) over OPEC’s supply cut rebalancing the markets,” he said.

“While the current momentum suggests that further upside is on the cards, it must be kept in mind that U.S. shale remains a threat to higher oil prices.”

Oil prices hit fresh mid-2015 highs despite higher US output

CNBC

  • Oil prices hit a fresh mid-2015 high, beating the level reached the previous session.
  • Unrest in Iran is expected to keep prices firm.
  • There was also some concern that output by Russia was in fact not falling.

An oil pump jack in the oil town of Gonzales, Texas.

Getty Images
An oil pump jack in the oil town of Gonzales, Texas.

U.S crude oil hit a fresh 2½-year high on Wednesday as high output in the United States and Russia balanced tensions from a sixth day of unrest in OPEC member Iran.

U.S. West Texas Intermediate (WTI) crude futures were at $60.86 a barrel by 7:51 a.m. ET (1251 GMT), up 49 cents from their last close, after touching $60.90, the highest since June 2015.

Brent crude futures — the international benchmark for oil prices — were at $67 a barrel, up 43 cents but still trailing Tuesday’s high of $67.29 that was the most since May 2015.

Traders said lags to Tuesday highs followed indications that markets had recently overshot as U.S. production is set to rise further and doubts are emerging about whether demand growth can continue at current levels.

Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, warned “multiple but temporary supply disruptions” like the North Sea Forties and Libyan pipeline outages (and) protests across Iran … helped create a record speculative long bet.”

Russia staying in OPEC agreement reluctantly: BAML

Expect OPEC to signal cut agreement exit strategy by the end of fourth quarter: BAML  

With the pipeline outages resolved and the protests in Iran showing no signs of impacting its oil production, Hansen said there was potential for a price downturn in early 2018, especially due to rising U.S. output.

“It is only a matter of time before the 10 million barrel per day (bpd) (U.S.) production target will be reached,” Hansen said.

Still, David Madden, market analyst at CMC Markets, said concerns over unrest in Iran would keep prices firm and should prevent any selloff as traders factored in the risks of potential supply disruptions.

“With this in mind, WTI will be hanging north of $60 until the market is confident tensions in Iran are cooling,” Madden said.

Supplies were healthy. U.S. oil production has risen by almost 16 percent since the middle of 2016, hitting 9.75 million bpd at the end of last year.

There was also some concern that Russian oil output is in fact not falling.

The country is the world’s biggest oil producer and one of the key backers, together with the Organization of the Petroleum Exporting Countries (OPEC), of cutting supplies.

Is a fresh supply response in store on higher oil prices?

Is a fresh supply response in store on higher oil prices?  

As part of the supply cut deal, Russia pledged to reduce its output by 300,000 bpd from the 30-year monthly high of 11.247 million bpd hit in October 2016, which it achieved by the second quarter of 2017, according to Russian energy ministry data.

For the whole of 2017, however, Russian output rose to an average of 10.98 million bpd, compared with 10.96 million bpd in 2016 and 10.72 million bpd in 2015.

“Even though they have reduced that astronomical number (from Oct. 2016), they are still producing more (in 2017 than in 2016),” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

Saxo Bank’s Hansen said he also had “some concerns about the Chinese economy in 2018 that ultimately could lead to lower than expected demand growth.”

As a result, he said his bank saw lower crude prices by the end of the year, with Brent at $60 per barrel and WTI at $57.