Oil remains close to late-2014 highs as ongoing supply cuts reduce inventories

CNBC

  • Oil prices were firm on Friday near three-year highs reached earlier this week.
  • OPEC has been withholding production since 2017 to draw down a supply overhang.
  • Crude prices have also been supported by an expectation that the U.S. will re-introduce sanctions on Iran.

An oil pump jack in Gonzales, Texas.

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An oil pump jack in Gonzales, Texas.

Oil prices on Friday stayed near three-year highs reached earlier this week, with ongoing OPEC-led supply cuts and strong demand gradually drawing down excess supplies.

Brent crude oil futures were at $73.74 per barrel at 0657 GMT, down 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 13 cents at $68.16 a barrel.

Both Brent and WTI hit their highest levels since November, 2014 on Thursday, at $74.75 and $69.56 per barrel respectively. WTI is set for its second weekly gain, climbing more than 1 percent this week, while Brent is also poised to rise for a second week, adding around 1.5 percent.

Traders said there had been some profit-taking on Friday following Thursday’s multi-year highs.

There was also some caution after Russia’s energy minister Alexander Novak was reported saying that a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia may this year ease output restrictions.

Producer cartel OPEC and its allies have been withholding production since 2017, helping push up prices. The deal to cut is currently scheduled to expire at the end of 2018.

After a tepid start in 2017, the supply restraint had by this year started tightening markets.
“Commercial inventories in the OECD are now essentially at their five-year average, and drawdowns likely accelerate as refineries emerge from maintenance ahead of peak seasonal demand,” U.S. investment bank Jefferies said on Friday.

Saudi Arabia is 'going to the whip' to drive oil prices higher, says pro

Saudi Arabia is ‘going to the whip’ to drive oil prices higher, says pro  

“OECD commercial inventories could fall back to … a level not seen since the oil price collapse that began in 3Q14. On a day of forward demand basis, we believe cover could drop below 57 days later this year, a level last seen in 2011,” it added.

The tightness is also a result of strong oil demand.

“Global oil demand data so far in 2018 has come in line with our optimistic expectations, with 1Q18 likely to post the strongest year-on-year growth since 4Q10 at 2.55 million barrels per day,” U.S. bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC’s supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

“The first key geopolitical issue is the expiration of the current U.S. waiver of key sanctions against Iran,” said Standard Chartered Bank in a note this week, referring to a deadline on May 12 when U.S. President Donald Trump will decide whether or not to re-impose sanctions.

One factor that could start weighing on prices is rising U.S. production, which has jumped by a quarter since the middle of 2016 to 10.54 million barrels per day (bpd), making the United States the world’s second-biggest producer of crude oil behind only Russia, which pumps almost 11 million bpd.

Oil near late-2014 highs as Saudi pushes for higher prices, US crude stocks decline

CNBC

  • Oil prices remained close to highs touched the previous day that were last seen in late 2014.
  • The EIA said on Wednesday that commercial crude stocks fell by 1.1 million barrels last week.
  • Reuters reported that Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices on Thursday remained close to late 2014-highs reached in the previous session as U.S. crude inventories declined and as top exporter Saudi Arabia pushes for prices of $80 to $100 per barrel by continuing to withhold supplies.

Brent crude oil futures were at $73.82 per barrel at 0325 GMT, up 34 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 28 cents, or 0.4 percent, at $68.75 a barrel.

Brent on Wednesday marked its highest level since November, 2014 at $73.93 per barrel. WTI hit its strongest since December, 2014 at $68.91 a barrel.

Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, which was seen as a sign that Riyadh will seek no changes to an OPEC supply-cutting deal that was introduced in 2017 to boost prices.

“The Saudis and their colleagues in OPEC need higher oil for their fiscal positions and the Kingdom is on a bold – and costly – reform program. So they might continue to squeeze the lemon while they have the chance,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) and a group of other producers that includes Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

“We are rapidly transitioning from a market drowning in oil (2014-2016) to a new reality of undersupply and low storage levels,” said Richard Robinson, manager of the Ashburton Global Energy Fund.

Since the start of the voluntary restraint, crude inventories have been gradually declining from record levels towards long-term average levels.

Further supporting oil prices is an expectation that the United States will re-introduce sanctions against OPEC-member Iran, which could result in further supply reductions from the Middle East.

In the United States, the Energy Information Administration (EIA) said on Wednesday that commercial crude stocks fell by 1.1 million barrels in the week to April 13, to 427.57 million barrels, which is close to the five-year average level around 420 million barrels.

“Oil prices have the potential to rise another 15 percent over the remainder of 2018,” Robinson said.

With crude prices on the rise, those producers not participating in voluntary restraint are ramping up output.

U.S. crude production has jumped by a quarter since mid-2016,to a record 10.54 million barrels per day (bpd).

That’s more than Saudi Arabia produces. Only Russia churns out more oil, at almost 11 million bpd.

Oil prices rise amid risk of supply disruptions

CNBC

  • Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply.
  • Traders said those risks included potentially spreading conflict in the Middle East and renewed U.S. sanctions against Iran.

Oil fracking California

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Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply, especially in the Middle East.

Brent crude oil futures were at $71.69 per barrel at 0326 GMT, up 27 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $66.54 a barrel.

Traders said oil markets were receiving general support due to a sense that there were high risks of supply disruptions, including a potentially spreading conflict in the Middle East, renewed U.S. sanctions against Iran and falling output as a result of political and economic crisis in Venezuela.

“With so many potential supply disruptors in play and few signs that the current market upheaval will end any time soon, traders continue to pay the geopolitical risk premium,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

“Oil prices should remain bid … at least through the Iran nuclear deal deadline (May 12) if not for the remainder of 2018,” he added.

Oil markets have generally been well supported this year, with Brent up by around 16 percent from its 2018-low in February, due to healthy demand which comes as the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) leads supply cuts aimed at tightening the market and propping up prices.

US output soars

Beyond OPEC’s production restraint and concerns about supply disruptions, the main market driver in oil has been the United States, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day (bpd), largely thanks to a booming shale industry.

Only Russia pumps out more oil currently at almost 11 million bpd.

“U.S. shale producers have been quietly capitalizing on higher oil prices with increasing rig counts seen. A staggering amount of 73 rotary rigs have been placed since January 2018,” said Benjamin Lu of Phillip Futures in a note on Tuesday.

“As such, we expect a softening in crude oil prices as markets adjust from a bullish streak,” he added.

The American Petroleum Institute (API) is due to publish weekly U.S. fuel inventory data later on Tuesday while official government data, including on production, is due from the U.S. Energy Information Administration (EIA) on Wednesday.

Oil markets tense after western strikes on Syria, rising US drilling weighs

CNBC

  • Oil fell 1 percent on Monday as markets opened following western air strikes in Syria over the weekend.
  • Oil markets also came under pressure from a rise in U.S. oil drilling activity.

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 fell 1 percent on Monday as markets opened following western air strikes in Syria over the weekend, while a rise in U.S. drilling for new production also dragged on prices.

The United States, France and Britain launched 105 missiles on Saturday, targeting what they said were three chemical weapons facilities in Syria in retaliation for a suspected poison gas attack in Douma on April 7.

Brent crude oil futures were at $71.85 per barrel at 0547 GMT, down 73 cents, or 1 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 57 cents, or 0.9 percent, at $66.82 a barrel.

Traders said markets in Asia began cautiously after the weekend strikes, with some relief that the move looked unlikely to escalate.

“In the wake of the coordinated attack on Syria, oil prices are significantly lower … (but) the impact appears to be compact and over,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

Oil markets also came under pressure from a rise in U.S. oil drilling activity.

U.S. energy companies added seven oil rigs drilling for new production in the week to April 13, bringing the total to 815, the highest since March 2015, energy services firm Baker Hughes said on Friday.

Despite this, Brent is still up more than 16 percent from its 2018 low in February, due to healthy demand and also because of conflict and tension in the Middle East.

Although Syria itself is not a significant oil producer, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

“Investors continued to worry about the impact of a wider conflict in the Middle East,” ANZ bank said.

Oil drops after US President Trump threatens new China trade tariffs

CNBC

  • Oil prices fell along with equities as U.S. President Trump’s threat of new tariffs on China reignited fears of a trade war between the world’s two biggest economies.
  • While oil market watchers were wary of the brewing trade war, they did not expect to see steep falls amid signs of tightening supplies.

Oil jack pumps in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters
Oil jack pumps in the Kern River oil field in Bakersfield, California.

Oil prices fell on Friday after U.S. President Donald Trump’s threat of new tariffs on China reignited fears of a trade war between the world’s two biggest economies.

President Trump said on Thursday he had ordered U.S. trade officials to consider tariffs on $100 billion more of imports from China, escalating tensions with Beijing.

Brent crude for June delivery was down 32 cents, or 0.5 percent, at $68.01 per barrel at 0410 GMT.

U.S. West Texas Intermediate crude for May delivery was down 35 cents, or 0.6 percent, at 63.19 a barrel.

Shanghai September crude futures were untraded due to public holidays in China, after falling 0.8 percent on Wednesday. Shanghai trading will resume on Monday.

While oil market watchers were wary of the brewing trade war between the United States and China, they did not expect to see steep falls amid signs of tightening supplies.

“As the escalating trade tensions continue to weigh on the commodity sector, we view the oil market as the best sector in which to wait out the volatility,” analysts at ANZ bank said in a note. “Supply-side issues amid a backdrop of falling inventories should override any concern over weaker economic growth.”

The Energy Information Administration reported a 4.6 million-barrel draw in U.S. crude inventories last week, compared with analysts’ expectations for an increase of 246,000 barrels.

“U.S. oil inventories remain a volatile gauge, but they still provide a good litmus test for the short-term,” said Stephen Innes, head of trading for the Asia-Pacific region at futures brokerage OANDA in Singapore.

Meanwhile, Saudi Arabia said on Thursday it would raise its official selling price for May crude for Asian customers.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia are committed to cutting output by around 1.8 million barrels per day through the end of 2018 in a bid to clear a global overhang and support prices.

Saudi Arabia, the de facto leader of the oil cartel, has said production cuts could be extended in one form or another.

OPEC and its allies should keep the cuts to ensure healthy price levels as a way to boost investment in the industry and avoid a supply and price shock in the long run, Qatar’s Energy Minister Mohammed al-Sada told Reuters.

Oil gains on US crude drawdown, easing of tension in US-China spat

CNBC

  • Oil prices rose on Thursday, buoyed by the U.S.government data showing a surprise drawdown in crude stockpiles.
  • Oil also got support from firm global equities, as the U.S. expressed willingness to negotiate a resolution on trade.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices rose on Thursday, buoyed by the U.S.government data showing a surprise drawdown in crude stockpiles and an easing of tensions over a trade row between the United States and China.

U.S. West Texas Intermediate crude for May delivery was up 27 cents, or 0.4 percent, at $63.64 a barrel by 0445 GMT after settling down 14 cents.

Front-month London Brent crude for June delivery was up 30 cents, or 0.4 percent, at $68.32, having ended down 10 cents.

Oil also got support from firm global equities, as the United States expressed willingness to negotiate a resolution on trade after proposed U.S. tariffs on $50 billion in Chinese goods prompted a quick response from Beijing that it would retaliate by targeting key American imports.

Oil prices have recently closely tracked equities.

“The two countries are using discretion in their actions, and it does not look like the situation is developing into a full-scale trade war yet,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “There is also hope for dialogue.”

Before the rebound late on Wednesday, after the release of the Energy Information Administration inventory data, WTI and Brent had hit two-week lows after China proposed a broad range of tariffs on U.S. exports, feeding fears of a trade war.

U.S. crude inventories fell by 4.6 million barrels last week, compared with analysts’ expectations for an increase of 246,000 barrels, EIA data showed on Wednesday.

Oil has also received support after a Reuters survey showed on Wednesday that OPEC oil output fell in March to an 11-month low due to declining Angolan exports, Libyan outages and a further slide in Venezuelan output.

Shanghai crude futures trading was closed on Thursday due to a public holiday in China. Trading will resume on Monday.

Oil inches up, but rising Russian output still weighs

CNBC

  • Oil prices inched up on Tuesday.
  • There was pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all crude grades it sells to Asia in May.
  • One of the key price drivers going forward will be crude output from the U.S., which has risen by almost a quarter since mid-2016.

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Oil prices inched up on Tuesday as rising Russian output and expectations of a reduction in Saudi Arabian crude prices were offset by a potential slowdown in U.S. production.

U.S. West Texas Intermediate crude futures were at $63.13 a barrel at 0434 GMT, up 11 cents from their previous settlement.

Brent crude futures rose to $67.80 per barrel, up 16 cents after falling by 2.5 percent on Monday.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said traders were wary of the fact that the market was still holding large amounts of long positions which will need to be sold off at some stage.

“That makes prices vulnerable to bad news,” he said, pointing to rising Russian production and the likely drop in Saudi physical crude prices.

Hedge funds and other speculators raised their net long positions in WTI futures and options in the week to March 27, the U.S. Commodity Futures Trading Commission said on Friday. That was the second consecutive increase and the amount of contracts held is close to the record reached in January.

Brent reached a 2018 high of $71.28 a barrel in January but has since struggled to pass that level. Two rallies last week ran out of steam just above $71.

There was also pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all the crude grades it sells to Asia in May.

This came amid rising supplies. Top producer Russia pumped 10.97 million barrels per day (bpd) of crude in March, up from 10.95 million bpd in February, official data showed, an 11-month high.

Saudi Arabia and Russia have led ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers outside of OPEC to cut back output to support prices.

One of the key price drivers going forward will be fuel inventories and crude output from the United States, which has risen by almost a quarter since mid-2016 to 10.43 million bpd, overtaking Saudi Arabia and coming in just shy of Russia.

The American Petroleum Institute (API) is due to publish fuel inventory data later on Tuesday.

“We expect for a gentle dip in prices today amidst bearish reports from the American Petroleum Institute (API),” Singapore-based Phillip Futures said.

Crude oil inventories are forecast to rise for a second week, gaining by 1.7 million barrels in the week to March 30, according to a Reuters poll on Monday.

Weekly production and inventory data by the Energy InformationAdministration (EIA) is due to be published on Wednesday.

“Production data released on Wednesday will offer a fresher clue on which direction prices are going,” Ma Kun, general manager of Energy and Chemicals at Bank of China International Futures said.