Oil strengthens ahead of G20 meeting, but supply rise caps gains

CNBC

  • Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.
  • U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.
  • International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in U.S. crude inventories to their highest in a year curbed gains.

U.S. crude futures rose 38 cents, or 0.8 percent, to $50.67 per barrel by 0338 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.

International benchmark Brent crude rose 27 cents, or 0.5 percent, to $59.03 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

Both markets rose more than 1 percent in early Asian trade.

“We have seen huge increases in supply and the demand picture is in question. However, we might see some movement on global trade issues at the G20 meeting which starts on Friday,” said Michael McCarthy, chief strategist at CMC Markets and Stockbroking.

“I think we are seeing some positioning ahead of those potential demand-positive events.”

Investors in commodity markets are looking ahead to the meeting of leaders of the Group of 20 nations (G20), the world’s biggest economies, on Nov. 30 and Dec. 1, with the U.S.-China trade war at the top of the agenda.

U.S. President Donald Trump is open to a trade deal with China but is also prepared to hike tariffs on imports from the country if there is no breakthrough on longstanding trade issues during a dinner on Saturday with Chinese leader Xi Jinping, White House economic adviser Larry Kudlow said on Tuesday.

Xi said China will widen market access for foreign investors and step up protection of intellectual property rights.

Meanwhile, rising supplies are keeping a lid on prices.

U.S. crude inventories for the week to Nov. 23 added 3.6 million barrels to the most in a year at 450 million barrels, exceeding expectations, the Energy Information Administration said on Wednesday.

“WTI oil is now trading right around the $50 per barrel level, a price last seen well over a year ago, as the current oversupply situation has now manifested itself in 10 consecutive weekly increases in U.S. oil inventories,” said William O’Loughlin, Investment Analyst at Australia’s Rivkin Securities.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members will meet in Vienna, Austria on Dec. 6 to discuss a new round of production cuts of 1 million to 1.4 million barrels per day (bpd) and possibly more, OPEC delegates told Reuters earlier this month.

Oil bounces above $63 after slide, but glut worries persist

CNBC

  • American Petroleum Institute says U.S. crude oil inventories are falling.
  • Fearing a glut, OPEC pushes for a supply curb.
  • Trump support for Saudi Arabia makes oil supply cut harder, say analysts.

Oil bounced above $63 a barrel on Wednesday to claw back some of the previous day’s 6 percent plunge, lifted by a report of an unexpected decline in U.S. crude inventories.

The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories last week fell by 1.5 million barrels, easing concerns for now that a supply glut is building up.

“The move yesterday was extremely sharp; after such moves you expect to have some rebound,” said Olivier Jakob, analyst at Petromatrix. “The API reported a stock draw – it is not a big one but at least it’s not a 10-million-barrel build.”

Brent crude, the global benchmark, was up 92 cents to $63.45 per barrel at 0944 GMT and traded as high as $63.67. U.S. crudegained 98 cents to $54.41.

Yet Wednesday’s bounce did little to reverse overall market weakness. Crude fell more than 6 percent in the previous session and world equities tumbled as investors grew more worried about economic growth prospects.

Brent has fallen by more than 25 percent since reaching a 4-year high of $86.74 on Oct. 3, reflecting concern about forecasts of slowing demand in 2019 and record supply from Saudi Arabia, Russia and the United States.

Worried by the prospect of a new supply glut, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.

OPEC, plus Russia and other non-OPEC producers, is considering a supply cut of between 1 million barrels per day (bpd) and 1.4 million bpd at a Dec. 6 meeting, sources familiar with the issue have said.

Still, Saudi Arabia may find taking action to support prices harder, analysts say, given U.S. pressure to keep them low and President Donald Trump standing by the Saudi crown prince in the wake of the murder of journalist Jamal Khashoggi.

Trump vowed on Tuesday to remain a “steadfast partner” of Saudi Arabia despite saying that Saudi Crown Prince Mohammed bin Salman may have known about a plan to murder Khashoggi.

“It is more difficult to expect a supply cut when you have the U.S. president giving full support to Saudi Arabia and asking Saudi to maintain low prices,” Jakob said.

Analysts at JBC Energy said Trump’s statement “highlights the potential for political fallout for Saudi itself from a hefty cut in production.”

Oil prices drop as focus shifts to oversupply

CNBC

  • Saudi Arabia’s OPEC governor said on Thursday the oil market could be heading into oversupply.
  • Oil prices have slumped this week amid declines in the stock markets.

Oil prices fell on Friday and were heading for a third weekly loss, pulled down as Saudi Arabia’s OPEC governor said the market may become oversupplied soon and after a slump in global equities clouded the outlook for demand.

Brent crude futures were down 51 cents, or 0.7 percent, at $76.38 a barrel by 0331 GMT. The global benchmark is on course for a weekly loss of over 4 percent.

U.S. crude was down 64 cents, or 1 percent, at $66.68 a barrel. The U.S. benchmark is set for a 3.5 percent loss this week.

“Bearish sentiment could force a re-test of support in the low $70.0 per barrel range,” Fitch Solutions said in a note on Friday.

Saudi Arabia’s OPEC governor said on Thursday that the oil market could face oversupply in the current quarter.

“The market in the fourth quarter could be shifting towards an oversupply situation as evidenced by rising inventories over the past few weeks,” Adeeb Al-Aama told Reuters.

Saudi Arabia Energy Minister Khalid Al-Falih said there could be a need for intervention to reduce oil stockpiles after increases in recent months.

U.S. crude oil stockpiles rose last week for the fifth consecutive week, while gasoline and distillate inventories fell, the Energy Information Administration said this week.

Falls in stock markets have roiled oil prices this week as Wall Street had its biggest daily decline since 2011.

“The near $10 per barrel drop in Brent crude seen over October is a spillover from the global sell-off in equities and broader risk-off sentiment in the market,” said Fitch Solutions.

Financial markets have been hit hard by a range of worries, including the U.S.-China trade war, a rout in emerging market currencies, rising borrowing costs and bond yields, and economic concerns in Italy.

There are also signs of a slowdown in global trade, with container and bulk freight rates dropping away after rising for most of 2018.

Despite this, Fitch Solutions said “fundamentals in oil … remain broadly bullish”, largely because of the U.S. sanctions against Iran’s oil exports, which start on Nov. 4.

Washington is putting pressure on governments around the world to stop importing oil from Iran.

Most, including its biggest customer China, are falling in line, and Iran has turned to storing its unsold oil on its tanker fleet in the hope that it can sell the crude off quickly once the sanctions are lifted again.

US crude rises 1.3%, settling at $68.72 and snapping 7-week losing streak

CNBC

  • Brent and U.S. crude rise, putting futures on pace to snap several weeks of declines.
  • Crude futures draw support from signs that U.S. sanctions on Iran are already reducing global crude supply.
  • The market remains cautious after U.S.-China talks aimed at resolving a trade dispute ended Thursday with no breakthrough

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil prices rose on Friday, but pared gains ahead of the close, as the market remained on edge about potential oversupply despite signs that Iran sanctions could curb output.

“In the near term we’re still fairly well supplied,” said John Kilduff, a partner at Again Capital Management.

U.S. West Texas Intermediate crude rose 89 cents, or 1.3 percent, to $68.72. For the week, WTI gained 4.3 percent, snapping a seven-week losing streak.

Benchmark Brent crude oil was up $1.02, or 1.4 percent, at $75.75 a barrel by 2:24 p.m. ET. Brent was on track for a gain of more than 5 percent this week, following three consecutive weekly losses.

“Both crude markers are on track to end a steady run of weekly declines. This is largely due to a tightening fundamental outlook on the back of looming Iranian supply shortages,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

Outlook for oil prices

There will be further ‘upside’ to oil prices this year due to supply disruptions: Bernstein  

Concerns that an escalating trade war between China and the U.S. could slow economic growth and weigh on crude purchases eased slightly after sources told Reuters that China’s Unipec will resume purchases of U.S. crude oil in October, after a two-month halt due to the fight.

Worries that Mexico’s incoming administration would not strike a bilateral agreement over NAFTA with the U.S. also weighed on the market, traders said. A dispute over opening up the oil and gas sector is weighing on the talks, Bloomberg reported, citing two people familiar with negotiations.

At the same time, concerns about global crude supply intensified with signs that U.S. sanctions on Iran are curbing shipments.

The U.S. government re-imposed sanctions on Iran this month after withdrawing from a 2015 international nuclear deal, which Washington saw as inadequate for curbing Tehran’s activities in the Middle East and denying it the means to make an atomic bomb. Tehran says it has no ambitions to make such a bomb.

Iran is the third-biggest producer in the Organization of the Petroleum Exporting Countries, supplying around 2.5 million barrels per day (bpd) of crude and condensate to markets this year, equivalent to around 2.5 percent of global consumption.

“Third-party reports indicate that Iranian tanker loadings are already down by around 700,000 bpd in the first half of August relative to July, which if it holds will exceed most expectations,” U.S. investment bank Jefferies said on Friday.

“We expect that by Q4 the market will be dealing with either undersupply, dwindling spare capacity – or both,” it added.

Jackie DeAngelis commodity hit

Crude mostly flat on the day  

Energy consultancy FGE says it expects Iran’s crude and condensate exports to drop below 1 million bpd by mid-2019.

The dollar index served as a tailwind, said Bob Yawger, director of futures at Mizuho in New York. A key index of the dollar versus a basket of other currencies fell on Friday, boosting the price of oil and other dollar denominated commodities.

The dollar fell after Federal Reserve Chair Jerome Powell said steady rate hikes are the best way to protect the U.S. economic recovery.

U.S. energy companies cut nine oil drilling rigs this week, the biggest reduction since May 2016, General Electric Co’s Baker Hughes energy services firm said. Changes in the rig count serves as an indicator of future production trends.

Traders kept an eye on the North Sea, where workers on three oil and gas platforms plan to strike next month. Oil production will stop during the strikes. The three fields contribute about 45,000 to 50,000 bpd to the North Sea’s Forties and Brent crude streams.

— CNBC’s Tom DiChristopher contributed to this report.

Oil trades higher after two days of heavy losses

CNBC

  • Oil prices rose on Thursday and recouped a portion of the losses over the last two days that were driven by reports showing surprise gains in U.S. inventories of crude.
  • U.S. crude traded at $67.92 a barrel and global benchmark Brent was at $72.64.
  • U.S. crude inventories rose 3.8 million barrels last week as imports jumped, the government’s Energy Information Administration said.

Oil prices rose on Thursday, recouping a portion of the losses of the last two days that were driven by reports showing surprise gains in U.S. inventories of crude, along with mounting concern over trade friction between the U.S. and China.

Brent crude futures were up 25 cents, or 0.4 percent, at $72.64 a barrel by 0055 GMT, after dropping 2.5 percent on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures increased by 26 cents, or 0.4 percent, to $67.92 a barrel. They fell $1.6 percent in the previous session.

U.S. crude inventories rose 3.8 million barrels last week as imports jumped, the government’s Energy Information Administration said.

Analysts polled by Reuters had expected a decline of 2.8 million barrels.

There were some bullish elements in the report, notably gasoline stocks declining by 2.5 million barrels.

Also, crude stocks at the Cushing, Oklahoma, delivery hub for WTI futures were down, dropping by 1.3 million barrels, EIA data showed.

On Tuesday, the EIA reported that U.S. crude production fell 30,000 barrels per day to 10.44 million bpd in May.

Nonetheless, the tough talk from Washington on trade with China has put pressure on oil prices.

U.S. President Donald Trump sought to ratchet up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports, his administration said on Wednesday.

China said it would hit back if the United States takes further steps on trade.

Brent prices fell more than 6 percent and U.S. crude slumped about 7 percent, the biggest monthly declines for both benchmarks since July 2016.

Brazilian oil exports hit a record in July, nearly three times its shipments in June and 50 percent higher than a year earlier, government data showed on Wednesday.

Iraq exported 3.543 million barrels per day (bpd) of crude from its southern ports in July, slightly above the June average, the oil ministry said on Wednesday.

Russian oil production last month was on average above the level Moscow promised following the Organization of the Petroleum Exporting Countries and non-OPEC meeting in June, energy minister Alexander Novak indicated on Wednesday.

Novak said that higher production was needed to maintain the market’s stability.