Oil prices edge lower after US inventories build

Oil prices edge lower after US inventories build

Reuters

KEY POINTS
  • Brent futures eased 2 cents to $69.29 by 0100 GMT. On Wednesday, Brent dipped 6 cents, after touching $69.96, the highest since Nov. 12, when it last traded above $70.
  • U.S. West Texas Intermediate (WTI) crude was down 14 cents, or 0.2 percent, at $62.34 a barrel. The contract fell 12 cents in the previous session after briefly hitting $62.99, also the highest since November.
Reusable: Rusted oil extraction equipment
An idled pump jack, once used to extract crude oil from the ground, and a tank battery, used to temporarily store freshly-pumped crude, rust in a farmer’s field near Ridgway, Ill., Jan. 21, 2015.
Getty Images

Oil prices dipped on Thursday, with Brent edging away from the psychologically important $70 level after easing in the previous session on data showing a surprise build in U.S. inventories.

Brent futures eased 2 cents to $69.29 by 0100 GMT. On Wednesday, Brent dipped 6 cents, after touching $69.96, the highest since Nov. 12, when it last traded above $70.

U.S. West Texas Intermediate (WTI) crude was down 14 cents, or 0.2 percent, at $62.34 a barrel. The contract fell 12 cents in the previous session after briefly hitting $62.99, also the highest since November.

Crude oil inventories in the United States rose by 7.2 million barrels last week, as net imports climbed, the Energy Information Administration said on Wednesday. Analysts had forecast a decrease of 425,000 barrels.

The increase “encouraged a wave of profit taking as traders are opting to take some chips off the table ahead of the psychologically significant $70 per barrel for prompt Brent,” Stephen Innes, head of trading and market strategy at SPI Asset Management, said in a note.

The $70 level “could prove to be the real litmus test for this current rally,” he added.

Brent, the global benchmark, is up nearly 30 percent this year, while WTI has gained nearly 40 percent, with prices underpinned by tightening global supply and signs of demand picking up.

U.S. crude production climbed 100,000 barrels per day (bpd) to a record 12.2 million bpd, after hovering around 12-12.1 million bpd since mid-February, according to the data from the Energy Information Administration.

Refined fuel inventories fell more than expected, with gasoline drawing down for a seventh straight week, as refining rates remained low, the data from the statistical arm of the Department of Energy showed.

Oil rises on OPEC-led supply cuts, report of falling US crude inventories

CNBC

Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures gained.
  • U.S. crude oil inventories fell by 4.2 million barrels in the week to Feb. 22, to 444.3 million barrels, the American Petroleum Institute (API) estimated in a weekly report on Tuesday.
  • Meanwhile, OPEC has indicated it will continue to withhold supply despite pressure from U.S. President Donald Trump this week to stop artificially tightening markets.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices rose on Wednesday after a report of declining crude inventories in the country and as producer club OPEC seemed to stick to its supply cuts despite pressure from U.S. President Donald Trump.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.02 per barrel at 0100 GMT, up 52 cents, or 0.9 percent, from their last settlement.

International Brent crude futures were at $65.55 per barrel, up 34 cents, or 0.5 percent from their last close.

U.S. crude oil inventories fell by 4.2 million barrels in the week to Feb. 22, to 444.3 million barrels, the American Petroleum Institute (API) estimated in a weekly report on Tuesday.

Official data will be released by the U.S. Energy Information Administration (EIA) after 1800 GMT.

Oil markets have generally received support this year from supply curbs by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as OPEC+, agreed late last year to cut output by 1.2 million barrels per day (bpd) to prop up prices.

And the group has indicated it will continue to withhold supply despite pressure from U.S. President Donald Trump this week to stop artificially tightening markets.

“Crude oil has been rising lately, not due to strong growth and rising demand but primarily due to a politically orchestrated cut in production from OPEC and friends,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

Despite this, oil remains in ample supply as U.S. crude oil production has risen by more than 2 million bpd over the past year, to a record 12 million bpd, and because demand growth is low because of a global economic slowdown and improving energy efficiency across industries.

“The OPEC+ production cuts have … so far failed to create the tightness needed to support a continued rally,” Hansen said.

Record U.S. crude production weighs on oil prices

CNBC

  • Oil prices dipped on Thursday as U.S. crude production quickly approached an unprecedented 12 million barrels per day (bpd) just as worries about weakening demand emerge.
  • U.S. West Texas Intermediate (WTI) crude futures were at $52 per barrel at 0140 GMT, down 31 cents, or 0.6 percent, from their last settlement.
  • International Brent crude oil futures were down 34 cents, or 0.6 percent, at $60.98 per barrel.

Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Essam Al-Sudani | Reuters
Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Oil prices dipped on Thursday as U.S. crude production quickly approached an unprecedented 12 million barrels per day (bpd) just as worries about weakening demand emerge.

U.S. West Texas Intermediate (WTI) crude futures were at $52 per barrel at 0140 GMT, down 31 cents, or 0.6 percent, from their last settlement.

International Brent crude oil futures were down 34 cents, or 0.6 percent, at $60.98 per barrel.

American crude oil production reached a record 11.9 million bpd in the week ending Jan. 11, the Energy Information Administration (EIA) said on Wednesday, up from 11.7 million bpd last week, which was already the highest national output in the world.

U.S. output has soared by 2.4 million bpd since January 2018, stoking fears of a supply glut.

The EIA also said gasoline stockpiles climbed 7.5 million barrels last week, far exceeding analyst expectations in a Reuters poll for a 2.8 million-barrel gain. At 255.6 million barrels, gasoline stocks were at their highest weekly level since February, 2017.

“While (U.S. crude) inventories fell slightly more than expected, there was a large build in gasoline inventories. This stoked fears of weak demand in the U.S.,” ANZ Bank said in a note.

Distillate stockpiles, which include diesel and heating oil, rose by 3.0 million barrels, versus expectations for a 1.6 million-barrel increase, the EIA data showed.

U.S. exports surge, OPEC cuts

Along with the surge in U.S. crude output, exports from the United States are also rising, hitting a record 3.2 million bpd by the end of last year.

“Crude oil exports from the U.S. have strongly increased during the last few years and the trend is expected to remain positive,” shipping brokerage Banchero Costa said in a note.

Norbert Ruecker, head of commodity research at Swiss Julius Baer, said “the United States is moving forward towards energy independence and is set to become a petroleum net exporter next year thanks to rising shale output”.

Soaring U.S. supply comes amid concerns over stuttering demand-growth due to a global economic slowdown, which some analysts believe will turn into a recession.

To stem a lurking petroleum glut, the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer Russia are leading efforts to cut supply.

This has prevented crude prices from falling much lower despite softening demand and the surge in U.S. output.

Brent crude edges up, but concern over demand limits gains

CNBC

  • Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent so far this quarter.
  • The price drop has caused U.S. shale oil producers to curtail drilling plans for next year.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices edged up on Monday after evidence that a recent fall to 15-month lows may be affecting output in the United States, the world’s largest producer, although concern about the outlook for demand tempered gains.

Brent crude futures were up 12 cents at $53.94 a barrel by 0858 GMT, while U.S. crude futures lost 3 cents to $45.56.

Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent so far this quarter.

The price drop has caused U.S. shale oil producers to curtail drilling plans for next year.

The boom in shale output has made the United States the world’s largest oil producer, overtaking Saudi Arabia and Russia.

Physical prices for Brent have also fallen in the last six weeks, driven by a drop in demand from Chinese refiners in particular, which has weighed on the value of barrels of anything from North Sea to Nigerian crude.

“The recent weakness in the physical Brent structure can be attributed to a broader easing of purchases by Asian refiners at this point, with lower end-Q1 intake weighing on spot assessments, and we can expect this pressure to carry through over the coming weeks,” consultancy JBC Energy said in a report.

Still, the macroeconomic picture and its impact on oil demand continue to pressure prices. Global equities have fallen nearly 9.5 percent so far in December, their biggest one-month slide since September 2011, when the euro zone debt crisis was unfolding.

The trade dispute between the United States and China and the prospect of a rapid rise in U.S. interest rates have brought global stocks down from this year’s record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day from January.

Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.

“Oil ministers are already taking to the airwaves with a ‘price stability at all cost’ mantra,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Oil prices resume drop, shed most of last session’s gains

CNBC

  • Concerns over oversupply and the outlook for demand continue to weigh on oil prices.
  • U.S. crude inventories fell by 497,000 barrels in the week to Dec. 14, according to the U.S. Energy Information Administration, smaller than the decrease of 2.4 million barrels analysts had expected.
  • The decline in U.S. crude inventories was the third consecutive decrease.

Oil prices fell on Thursday to erase most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy.

The front-month U.S. crude contract had dropped more than $1, or 2.24 percent, to $47.10 per barrel by 0423 GMT, offseting gains of 96 cents chalked up on Wednesday.

International benchmark Brent crude futures were down over $1, or 1.82 percent, at $56.20 per barrel, after climbing almost 2 percent the session before.

“Wednesday’s recovery was short-covering. Investors quickly moved their attention to deteriorating fundamentals in the oil markets including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production,” said Xi Jiarui, chief oil analyst at consultancy JLC.

The Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed this month to curb output by 1.2 million barrels per day (bpd) in an attempt to drain tanks and boost prices.

Oil prices are down more than 30 percent from peaks seen in October.

But the cuts will not happen until next month and production has been at or near record highs in the United States, Russia and Saudi Arabia.

Saudi Arabia’s energy minister, Khalid al-Falih, said he expected global oil stocks to fall by the end of the first quarter, but added that the market remained vulnerable to political and economic factors as well as speculation.

Technical analysis showed U.S. oil may retest support at $45.94 per barrel, a break below which could cause a loss to $44.43, Reuters market analyst Wang Tao wrote on Thursday.

Squaring up

Volatility in crude prices this week has driven investors to shut their positions and is draining liquidity from the market, Xi said.

Total market open interest in U.S. crude contracts had fallen to 2.063 million contracts as of Thursday, up from a record of 2.71 million in May.

“It has been a tumultuous week in oil markets and traders may opt to shut it down after the last big risk event of the year with year-end position-squaring likely to kick-in today,” said Stephen Innes, head of trading for Asia-Pacific at OANDA.

Innes was referring to the U.S. Federal Reserve’s last policy meeting of 2018, at which it suggested the U.S. economy no longer needed the central bank’s support either through lower-than-normal interest rates or by maintaining a massive balance sheet.

But U.S. inventory data offered some support to WTI prices.

U.S. crude inventories fell by 497,000 barrels in the week to Dec. 14, the U.S. Energy Information Administration said on Wednesday, smaller than the decrease of 2.4 million barrels analysts had expected. The decline was the third consecutive decrease.

Distillate stockpiles, which include diesel and heating oil, fell by 4.2 million barrels, versus expectations of a 573,000-barrel increase, the EIA said.

Distillate demand rose to the highest since January 2003, which bolstered buying, particularly in heating oil futures, the market’s proxy for diesel.