Oil dips as U.S. inventory build stokes supply fears

CNBC

Reuters
KEY POINTS
  • Brent crude futures fell 13 cents, or 0.3%, to $42.95 a barrel by 0019 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures dropped 10 cents, or 0.3%, to $40.52 a barrel.
South Belridge Oil Field is the fourth-largest oil field in California and one of the most productive in the U.S.
South Belridge Oil Field is the fourth-largest oil field in California and one of the most productive in the U.S.
David McNew | Getty Images

Oil prices eased in early trade on Wednesday as industry data showing a build in U.S. crude stockpiles and a forecast for U.S. crude output to fall less than anticipated in 2020 added to worries about oversupply.

Brent crude futures fell 13 cents, or 0.3%, to $42.95 a barrel by 0019 GMT. U.S. West Texas Intermediate (WTI) crude futures dropped 10 cents, or 0.3%, to $40.52 a barrel.

Prices were little changed in the previous session and have been held in a narrow band over the past two weeks as concerns about a spike in coronavirus cases globally tempers optimism about a recovery in fuel demand.

U.S. crude oil stockpiles rose last week, against expectations for a draw, although gasoline and distillate inventories fell more than expected, data from industry group the American Petroleum Institute showed on Tuesday.

The U.S. Energy Information Administration’s (EIA) said on Tuesday U.S. crude oil production is expected to fall by 600,000 barrels per day (bpd) in 2020, a smaller decline than the 670,000 bpd it forecast previously.

However, it also expected global oil demand would recover through the end of 2021, predicting demand of 101.1 million bpd by the fourth quarter of next year.

“The EIA’s forecast of a lower decline in U.S. output was partially offset by its outlook for firm demand recovery, which limited losses in oil markets,” Hiroyuki Kikukawa, general manager of research at Nissan Securities said.

“Still, expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allies would taper oil output cuts from August and softer U.S. equities added to pressure,” he said.

Abu Dhabi National Oil Co (ADNOC) plans to boost oil exports in August, the first signal that OPEC and its allies, together known as OPEC+, are preparing to ease record oil output cuts next month, three sources familiar with the development told Reuters.

Key ministers of the OPEC+ are due to hold talks next week.

Meanwhile, the number of confirmed coronavirus cases in the United States pushed past 3 million on Tuesday, according to a Reuters tally.

Oil prices fall as U.S. fuel demand remains weak

CNBC

Reuters
KEY POINTS
  • Brent crude slipped 25 cents, or 0.7%, to $35.04 a barrel by 0334 GMT.
  • U.S. West Texas Intermediate crude was at $33.18 a barrel, down 53 cents, or 1.6%.
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 edged lower on Friday after U.S. inventory data showed lackluster fuel demand in the world’s largest oil consumer while worsening U.S.-China tensions weighed on global financial markets.

Brent crude slipped 25 cents, or 0.7%, to $35.04 a barrel by 0334 GMT and U.S. West Texas Intermediate crude was at $33.18 a barrel, down 53 cents, or 1.6%. Still, both contracts are set for a fifth weekly gain, helped by production cuts and optimism about demand recovery in other countries.

“The rally needs a breather. It has been four weeks of gains and the market needs to buy time for downstream prices to catch up,” OCBC economist Howie Lee said.

“Beyond the short term, the bullish momentum still looks rather intact.”

Thursday’s data from the Energy Information Administration showed that U.S.crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.

“Memorial Day weekend did not bring U.S. motorists out in droves like many market bulls were hoping,” RBC Capital Markets analyst Christopher Louney said in a note.

Looking ahead, traders will be focusing on the outcome of talks on output cuts between members of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, in the second week of June.

Saudi Arabia and some OPEC members are considering extending record production cuts of 9.7 million barrels per day beyond June, but have yet to win support from Russia.

Oil prices fall as rising U.S. inventories reassert supply concerns

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures fell as much as 2.1% to $24.05 a barrel and were down 14 cents at $24.41 a barrel at 0201 GMT. WTI has snapped a five-day winning streak.
  • Brent crude futures were flat at $30.97 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 fell on Wednesday, ending a multi-day streak of gains, as investors focused on oversupply risks after U.S. crude inventories rose more than expected amid a slump in demand caused by restrictions to halt the coronavirus spread.

U.S. West Texas Intermediate (WTI) crude futures fell as much as 2.1% to $24.05 a barrel and were down 14 cents at $24.41 a barrel at 0201 GMT. WTI has snapped a five-day winning streak.

Brent crude futures were flat at $30.97 a barrel.

Brent prices climbed 13.9% in the previous session, part of a six-day rise.

Investors may be hesitant to increase their purchases of Brent as the contract has climbed too much over the past streak.

Brent’s relative strength index, a technical measure used to track the future’s trading momentum, was at 72.93 on Wednesday, indicating it is overbought after the recent gains.

WTI also slipped after a report showed U.S. crude inventories rose 8.4 million barrels last week, more than expected, according to data from the American Petroleum Institute late on Tuesday.

Oil prices had gained recently as European and Asian countries had ended their lockdowns to halt the coronavirus spread and as producers had axed supply after the demand crunch. But analysts cautioned the rebalancing of the market would be choppy.

“We’re talking about normalisation of supply and demand but we’ve got a long way to go,” said Lachlan Shaw, National Australia Bank’s head of commodity strategy.

“There are a lot of supply cuts that have come through. That combined with some early signs of demand lifting has meant the rate of inventory build is slowing.”

But analysts also pointed to comments by U.S. shale producer Diamondback Energy saying it would consider reviving drilling plans if WTI held above $30 a barrel as a sign that producers will not want to shut in production for long.

“When (prices) start to hold on to those gains, there’ll be a point where producers start to reverse those well shut-ins,” Shaw said.

Gasoline stocks in the U.S., the world’s biggest producer and consumer of oil, fell by 2.2 million barrels, API reported, compared with analysts’ expectations in a Reuters poll for a 43,000 barrel increase, and refinery crude runs rose.

Traders will be looking for further confirmation of the inventory data when the Energy Information Administration comes out later on Wednesday.

Oil edges higher after hitting 18-year lows but demand outlook weighs

CNBC

Reuters
KEY POINTS
  • Brent crude was up 36 cents, or 1.3%, at $28.05 a barrel by 0502 GMT.
  • U.S. West Texas Intermediate (WTI) was up 10 cents, or 0.5%, at $19.97.
GP: Russian oil field 200401 ASIA
Oil pumping jacks, also known as “nodding donkeys,” operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg | Getty Images

Oil edged higher on Thursday following sharp losses in the previous session on hopes that a big build-up in U.S. inventories may mean producers have little option but to deepen output cuts as the coronavirus pandemic ravages demand.

With official data showing U.S. inventories surging the most on record, WTI fell on Wednesday to its lowest since February 2002, with Brent slumping more than 6%.

Brent crude was up 36 cents, or 1.3%, at $28.05 a barrel by 0502 GMT. U.S. West Texas Intermediate (WTI) was up 10 cents, or 0.5%, at $19.97.

Concerns about crumbling demand kept a lid on gains with both contracts having traded over 2.5% higher earlier in the session.

Energy Information Administration data also showed large U.S. refined fuels stock builds despite refiners operating at 69% of capacity nationwide, the lowest since September 2008.

“The massive storage build, as counterintuitive as it sounds, did provide some price support as the build foreshadows that more wellhead closures are just around the corner, which effectively trims U.S. supply,” said Stephen Innes, chief global markets strategist at AxiCorp.

The figures followed a report from the International Energy Agency (IEA) that forecast oil demand would fall by 29 million barrels per day (bpd) in April, to the lowest in 25 years, and just below 30% of global demand before the coronavirus outbreak.

That number is well above production cuts in the pipeline. The Organization of the Petroleum Exporting Countries (OPEC) and allied producers including Russia, a grouping known OPEC+, have agreed to reduce output by 9.7 million bpd, while hoped-for cuts of another 10 million bpd from other countries including the United States could lower production by 20 million bpd.

Last week, the EIA said U.S. production is expected to slump by 470,000 bpd.

“Given the scale of demand destruction this quarter, OPEC+ cuts will fall short of bringing the market to balance anytime soon, and this is reflected in the price weakness seen since the OPEC+ deal,” said ING bank in a note on Thursday.

Some countries have also committed to increasing purchases of oil for their strategic stockpiles, but there are physical limits to how much oil can be bought.

The “use of strategic petroleum reserves in China, India, South Korea, and the U.S. could add about 200 million barrels of temporary storage, but this only buys a few months of wiggle room,” said Innes.

Further cuts to production will be required “to avoid another collapse in oil prices,” he said.

Oil rises on bargain-hunting, hopes for stockpile purchases

CNBC

Reuters

KEY POINTS
  • Brent futures were up 38 cents, or 1.3%, at $29.98 a barrel as of 0201 GMT, after falling 6.7% on Tuesday.
  • U.S. West Texas Intermediate crude rose 36 cents, or 1.8%, at $20.47, having crashed 10.3% in the previous session.
GP: Oil storage 200403 Asia
Oil storage tanks stand at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., in Tuapse, Russia, on Monday, March 23, 2020.
Andrey Rudakov | Bloomberg | Getty Images

Oil prices rose on Wednesday as investors looked for bargains after the previous session’s slump and on hopes that consuming countries will look to fill their strategic reserves, although oversupply fears and warnings of a deep recession capped gains.

Brent futures were up 38 cents, or 1.3%, at $29.98 a barrel as of 0201 GMT, after falling 6.7% on Tuesday.

U.S. West Texas Intermediate crude rose 36 cents, or 1.8%, at $20.47, having crashed 10.3% in the previous session.

Both benchmarks were undercut by worries that a record global output cut by producers would not offset plunging fuel demand due to efforts to contain the coronavirus pandemic.

“Investors unwound short positions, after confirming a rise in U.S. crude oil stocks,” said Kazuhiko Saito, chief analyst at Fujitomi.

Before the report on U.S. inventories, “they had sold aggressively with expectations for such a build,” Saito said.

U.S. crude oil, gasoline and distillate stocks all rose sharply last week, data from industry group the American Petroleum Institute showed on Tuesday.

Crude inventories rose by 13.1 million barrels in the week ended on April 10 to 486.9 million barrels, more than analyst expectations for a build of 11.7 million barrels.

Hopes for massive purchasing by consuming countries for their strategic stockpiles also lent support.

Officials and sources from the Organization of the Petroleum Exporting Countries and its Russia-led allies — a grouping known as OPEC+ — have indicated that the International Energy Agency (IEA), energy watchdog for the world’s most industrialized nations, may announce purchases of up to several million barrels to buoy the record OPEC+ output cut.

The U.S. Energy Department said on Tuesday it is negotiating with nine energy companies to store about 23 million barrels of domestic oil in its Strategic Petroleum Reserve (SPR).

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday that oil purchases into countries SPRs would reach 200 million barrels over the next couple of months, citing the IEA.

Warnings of a deep recession by the International Monetary Fund (IMF), however, weighed on investor sentiment.

The global economy is expected to shrink by 3.0% during 2020 in a stunning coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the IMF said on Tuesday.