Oil rises after sharp drop in U.S. crude inventories

CNBC

Reuters
KEY POINTS
  • Brent crude rose 33 cents, or 0.8%, to $41.60 a barrel by 0044 GMT after declining more than 1% on Tuesday.
  • U.S. crude was up 42 cents, or 1.1%, at $39.69 a barrel, having dropped by 1.1% in the previous session.
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 rose on Wednesday after an industry report showed crude inventories in the United States fell much more than expected, suggesting demand is improving even as the coronavirus outbreak spreads around the world.

Brent crude rose 33 cents, or 0.8%, to $41.60 a barrel by 0044 GMT after declining more than 1% on Tuesday. U.S. crude was up 42 cents, or 1.1%, at $39.69 a barrel, having dropped by 1.1% in the previous session.

U.S. crude and gasoline stocks declined more than expected last week, while distillate inventories rose, data released by the American Petroleum Institute (API) late on Tuesday showed. [API/S]

Crude inventories dropped by 8.2 million barrels to 537 million barrels, against analysts’ forecasts for a draw of 710,000 barrels.

“If the API estimates are vetted by the official government agency data due out tomorrow, this will be viewed as a definite bullish signal,” said Stephen Innes, chief global markets strategist at AxiCorp.

“The reports could go a long way to easing some of those lingering inventory concerns,” he said.

Inventory data from the U.S. government’s Energy Information Administration is due out later on Wednesday.

Still prices are likely to be capped, analysts said, as the world is awash with oil after the coronavirus caused demand for fuel to drop by around a third.

A Reuters poll of analysts indicated that oil prices will consolidate at around $40 a barrel this year, with a recovery potentially picking up in the fourth quarter.

The virus continues to spread around the world with ever increasing rates of infection. Cases now total more than 10 million with more than half a million people dying after catching COVID-19.

Oil prices drop for second straight session as coronavirus spike cools demand hopes

CNBC

Reuters
KEY POINTS
  • Brent crude dropped 72 cents, or 1.8%, to $40.30 a barrel by 0231 GMT, while U.S. crude was at $37.82, down 67 cents, or 1.7%.
  • Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil prices slid for a second straight session on Monday as coronavirus cases rose in the United States and other places, leading countries to resume partial lockdowns that could hurt fuel demand.

Brent crude dropped 72 cents, or 1.8%, to $40.30 a barrel by 0231 GMT, while U.S. crude was at $37.82, down 67 cents, or 1.7%.

Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.

However, global coronavirus cases exceeded 10 million on Sunday as India and Brazil battled outbreaks of over 10,000 cases daily. New outbreaks are reported in countries including China, New Zealand and Australia, prompting governments to impose restrictions again.

“The second wave contagion is alive and well,” Howie Lee, economist at Singapore’s OCBC bank said. “That is capping the bullish sentiment that we’ve seen in the last six to eight weeks.”

Other factors restricting oil prices’ advance at this stage include poor refining margins, high oil inventories and the resumption of U.S. production, Lee said.

Despite efforts by OPEC+ – the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – to reduce supplies, crude inventories in the United States, the world’s largest oil producer and consumer, have hit all-time highs.

“There is also a risk that gains in prices recently could see some U.S. shale producers restart wells,” ANZ analysts said.

Even as the number of operating oil and natural gas rigs dropped to a record low last week, higher oil prices are prompting some producers to resume drilling.

“In the next one-two weeks, we should see an uptick in rig count commensurate with the pick-up in oil production,” OCBC’s Lee said.

Elsewhere, U.S. shale oil pioneer Chesapeake Energy Corp filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of coronavirus outbreak on energy markets.

Oil edges up on tighter supply, but demand concerns check gains

CNBC

Reuters
KEY POINTS
  • Brent crude rose 9 cents, or 0.2%, to $42.28 a barrel by 0009 GMT, while U.S. crude was at $39.76 a barrel, up 1 cent.
  • Both contracts rose about 9% last week and Brent crude futures flipped into backwardation, where oil for immediate delivery costs more than supply later, usually an indication of tightening supply.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil prices nudged higher on Monday on tighter supplies from major producers, but concerns that a record rise in global coronavirus cases could curb a recovery in fuel demand checked gains.

Brent crude rose 9 cents, or 0.2%, to $42.28 a barrel by 0009 GMT, while U.S. crude was at $39.76 a barrel, up 1 cent.

Both contracts rose about 9% last week and Brent crude futures flipped into backwardation, where oil for immediate delivery costs more than supply later, usually an indication of tightening supply.

In the United States and Canada, the number of operating oil and natural gas rigs fell to a record low even as higher oil prices prompt some producers to start drilling again.

Iraq and Kazakhstan pledged to comply better with oil production cuts during an OPEC+ panel on Thursday.

However, the OPEC+ group, consisting of Organization of the Petroleum Exporting Countries and its allies including Russia, has yet to decide whether to extend a record supply cut of 9.7 million barrels per day (bpd) for a fourth month in August.

Oil prices have also been supported by a recovery in fuel demand globally following a collapse in April-May during coronavirus shutdowns as countries across the world resume economic activities.

Still, the World Health Organization reported a record jump in global coronavirus cases on Sunday, with the biggest increase seen in north and south America.

Spikes in coronavirus infections in parts of the world such as Beijing and Australia’s second-most populous state Victoria have prompted authorities to reimpose movement restrictions to curb the spread.

“The potential economic damage of a new round of COVID-19 countermeasures will likely contain any investor enthusiasm,” said Michael McCarthy, chief market strategist at CMC Markets.

Oil falls on second wave outbreak fears, rise in US inventories

CNBC

Reuters
KEY POINTS
  • Brent crude was down 58 cents, or 1.9%, at $29.40 by 0221 GMT, having risen 1.2% on Tuesday.
  • U.S. crude was down 39 cents, or 1.5%, at $25.39 a barrel, after jumping nearly 7% in the previous session.
An aerial view shows a cruise ship (L) and tanker vessel 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 shows a cruise ship (L) and tanker vessel 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 fell on Wednesday on worries about a possible second wave of coronavirus cases in countries starting to ease lockdowns, while industry data showed a rise in U.S. crude inventories.

The concerns overshadowed a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump, after OPEC’s biggest producer said earlier this week it planned to add to cut output again.

Brent crude was down 58 cents, or 1.9%, at $29.40 by 0221 GMT, having risen 1.2% on Tuesday. U.S. crude was down 39 cents, or 1.5%, at $25.39 a barrel, after jumping nearly 7% in the previous session.

“While the market feels more comfortable on the supply side of the equation, on the demand side, the focus will continue to revolve around the risks of easing lockdowns,” said Stephen Innes, chief markets strategist at AxiCorp.

U.S. infectious disease expert Anthony Fauci on Tuesday told Congress that easing coronavirus lockdowns may set off new outbreaks of the illness, which has killed 80,000 Americans and badly damaged the world’s biggest economy.

New outbreaks have been reported in South Korea and in China, where the health crisis started before spreading around the world, prompting governments to lock down billions of people, devastating economies and demand for oil.

On the supply side, Saudi Arabia’s cabinet has urged OPEC+ countries to reduce oil output further to restore balance in global crude markets, the country’s state news agency reported early on Wednesday.

On Monday, Saudia Arabia said it would add to planned cuts by reducing production by a further 1 million barrels per day (bpd) next month, bringing output down to 7.5 million bpd.

The Organization of the Petroleum Export Countries (OPEC) and other producers such as Russia — a group known as OPEC+ — agreed to cut output by 9.7 million barrels per day (bpd) in May and June, a record reduction, in response to a 30% fall in global fuel demand.

In the United States, inventories of crude oil rose by 7.6 million barrels last week to 526.2 million barrels, against analysts’ expectations for an increase of 4.1 million barrels.

Still, stocks of crude at the Cushing, Oklahoma, delivery hub fell by 2.3 million barrels, API said, which, if confirmed by official data, would be the first drawdown since February, according to ING Economics.

“Concerns over hitting storage capacity have eased, as we see demand gradually recovering, along with supply cuts hitting the market,” ING said in a note, pointing to the decline in Cushing stocks.

Official storage data from the U.S. Energy Information Administration is due later on Wednesday.

Oil prices surge again US stockpiles grow less than feared, output cuts kick in

Reuters

KEY POINTS
  • Brent crude for July delivery, which started trading on Friday as the new front-month contract, was up $1.10, or 4.2%, at $27.58 a barrel by 0013 GMT. Brent gained 12% on Thursday.
  • U.S. crude for June delivery climbed $1.37, or 7.3%, to $20.21 a barrel, having gained 25% in the previous session.
GP: Oil storage tanks Carson CA
Oil-storage tanks are seen from above in Carson, California, April 25, 2020 after the price for crude plunged into negative territory for the first time in history on April 20.
Robyn Beck | AFP | Getty Images

Oil prices jumped on Friday, extending the previous session’s gains, buoyed by a lower-than-expected gain in U.S. crude inventories and the start of output cuts in a bid to offset a slump in fuel demand triggered by the coronavirus pandemic.

Brent crude for July delivery, which started trading on Friday as the new front-month contract, was up $1.10, or 4.2%, at $27.58 a barrel by 0013 GMT. Brent gained 12% on Thursday.

U.S. crude for June delivery climbed $1.37, or 7.3%, to $20.21 a barrel, having gained 25% in the previous session.

“This is a second straight week of inventory and product demand figures suggesting a bottoming of the U.S. market,” said Stephen Innes, chief market strategist at AxiCorp.

U.S. Energy Information Administration data showed crude inventories rose by 9 million barrels last week to 527.6 million barrels, less than the 10.6 million-barrel rise analysts had forecast in a Reuters poll.

The other significant support factor on Friday was the official start of output cuts agreed between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers like Russia – a grouping known as OPEC+ – to counter sliding demand.

“OPEC+ quotas are due to kick in on Friday, suggesting short-term supply conditions have likely peaked,” AxiCorp’s Innes said.

The OPEC+ deal covers a cut in production of nearly 10 million barrels per day (bpd), a record level.

That, nevertheless, falls well short of the roughly 30 million bpd of demand that has evaporated amid the coronavirus pandemic as much of the world’s population remains under some form of economic and social lockdown.