Oil prices jump 2 percent after Saudi Arabia announces December supply cut

CNBC

  • Oil prices rose by about one percent on Monday after top exporter Saudi Arabia announced a cut in supply for December, seen as a measure to halt a market slump that had seen crude decline by 20 percent since early October.
  • International benchmark Brent crude oil futures were at $71.11 per barrel at 0051 GMT, up 93 cents, or 1.3 percent from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $60.73 per barrel, up 54 cents, or 0.9 percent from their last settlement.

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil prices jumped more than 1.5 percent on Monday after top exporter Saudi Arabia announced a supply cut in December and other producers also considered reductions heading into 2019.

Front-month Brent crude futures, a benchmark for global oil prices, were at $71.59 per barrel at 0749 GMT, up 2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures rose 1.6 percent to $61.15 per barrel.

Saudi Arabia plans to reduce oil supply to world markets by 500,000 barrels per day (bpd) in December, its energy minister said on Sunday, as the country faces uncertain prospects in getting other producers to agree to a coordinated output cut.

Khalid al-Falih told reporters that Saudi Aramco’s customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 percent.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).

An official from Kuwait, also an OPEC member, on Monday said that major oil exporters over the weekend had “discussed a proposal for some kind of cut in (crude) supply next year”, although the official did not provide any detail.

OPEC’s second-biggest producer Iraq has also indicated it may join in such a move.

Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said OPEC was “focused on mitigating downside risks” after crude prices declined by around 20 percent over a month following a supply surge, particularly from the top three producers, the United States, Russia and Saudi Arabia.

For consumers, the 20 percent oil price fall since early October was a relief.

“This (price fall) is great news for the externally challenged economies of Asia like Indonesia and Philippines, India too, and helps also where inflation has been a concern,” Robert Carnell, chief economist and Head of Research at ING Asia, told the Reuters Global Markets Forum on Monday.

Major emerging economies like India, Indonesia and Turkey came under strong pressure earlier this year as their currencies slumped against the dollar just as oil prices surged, eroding demand.

Beyond demand concerns, a big concern for Saudi Arabia and other traditional producers from the Middle East-dominated OPEC is the surge in U.S. output.

U.S. energy firms last week added 12 oil rigs in the week to Nov. 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

The rig count indicates U.S. crude output, already at a record 11.6 million bpd, will increase further.

“One thing that is abundantly clear, OPEC is in for a shale shocker as U.S. crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Oil dips as soaring US production outweighs talk of OPEC output cuts

CNBC

  • Oil remains in ample availability despite U.S. sanctions on Iran fuel exports going into effect.
  • U.S. crude output has tripled since 2008, with the Energy Information Administration expecting it to break through 12 million barrels per day by mid-2019.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices dipped on Thursday as record U.S. crude output heightened concerns of a return of global oversupply, stoking talk from within OPEC that production curbs may become necessary once again to prevent a glut.

Front-month Brent crude oil futures were at $71.93 a barrel at 00301 GMT, down 14 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $61.68 per barrel, virtually flat from their last settlement.

Benjamin Lu of brokerage Phillip Futures in Singapore said that overall, “Oil prices continue to demonstrate…bearish influences amidst market concerns of rising global inventories… (and as) increasing output levels threaten to upset supply fundamentals in Q4 2018.”

A group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as Russia decided last June to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump to reduce oil prices and make up for supply losses from Iran.

But with Iran sanctions now in place and oil still in ample availability, OPEC-led production cuts next year cannot be ruled out, two OPEC sources said on Wednesday.

“OPEC and Russia may use cuts to support $70 per barrel,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“The introduction of U.S. sanctions earlier this week against Iran failed to lift the market given the announcement that eight countries, including three of the world’s biggest importers, would receive waivers to carry on buying Iranian crude for up to six months,” Hansen said.

Concerns over potential oversupply

At the heart of rising global output has been a relentless increase in U.S. crude production, which hit a record 11.6 million barrels per day (bpd) in the week ending Nov. 2, according to Energy Information Administration (EIA) data released on Wednesday.

That’s a threefold increase from the U.S. low reached a decade ago, and a 22.2 percent rise just this year. It makes the United States the world’s biggest producer of crude oil.

More U.S. oil will likely come. The EIA expects output to break through 12 million bpd by mid-2019, thanks largely to a surge in shale oil production.

Meanwhile, U.S. crude inventories rose by 5.8 million barrels in the week ending Nov. 2, to 431.79 million barrels, the EIA said.

Crude stocks moved back above their five-year average levels in October.

Production has not just risen in the United States, but also in many other countries, including Russia, Saudi Arabia, Iraq and Brazil, stoking producer concerns of a return of oversupply that depressed oil prices between 2014 and 2017.

“Producers are concerned about the potential oversupply … after EIA reported that crude inventories rose by 5.8 million barrels,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Oil prices rise for first time in three days, but trade war drags 

CNBC

  • Oil has been caught in this month’s global financial market slump.
  • The ongoing U.S.-China trade war has continued to weigh on the demand outlook for oil.

Oil prices climbed for the first time in three days on Wednesday, but rising supply and fears over the outlook for demand amid the U.S.-China trade war kept pressure on the market.

Brent crude futures had gained 47 cents, or 0.6 percent, to $76.38 a barrel by 0441 GMT. They fell 1.8 percent on Tuesday, at one point touching their lowest since Aug. 24 at $75.09 a barrel.

U.S. West Texas Intermediate (WTI) crude futures advanced 16 cents, or 0.2 percent, to $66.34 a barrel on Wednesday. They dropped 1.3 percent the day before, after hitting their weakest since Aug. 17 at $65.33 a barrel.

Both crude benchmarks have fallen about $10 a barrel from four-year highs reached in the first week of October, and are on track to post their worst monthly performance since July 2016.

“Everyone thought we were going to go into the $90s, but now we are heading for the $60s,” said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo, referring to Brent prices.

Oil has been caught in the global financial market slump this month, with equities under pressure from the trade scrap between the world’s two largest economies.

U.S. President Donald Trump said on Monday that he thinks there will be “a great deal” with China on trade but warned that he has billions of dollars worth of new tariffs ready to go if a deal is not possible.

Trump said he would like to make a deal now but that China was not ready. He did not elaborate.

The United States has already imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods.

In a bearish signal, the American Petroleum Institute reported U.S. crude inventories rose 5.7 million barrels last week, more than analyst forecasts for a 4.1 million-barrel build.

Investors will look to official government data on U.S. inventories due on Wednesday.

Oil production from Russia, the United States and Saudi Arabia reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed.

That is an increase of 10 million bpd since the start of the decade and means the three producers alone now meet a third of global crude demand.

The United States is set to impose new sanctions on Iranian crude from next week, and exports from the Islamic Republic have already begun to fall.

Saudi Arabia and Russia have said they will pump enough crude to meet demand once the sanctions kick in.

“(After the recent drop in oil prices), this is not the time to back off, if Trump wants to put the screws on Iran,” Nunan said.

Oil falls as investors wary of trade slowdown

CNBC

  • Oil markets remain tense ahead of impending U.S. sanctions against Iran’s crude exports, which are set to start next week.

Oil prices dipped on Monday amid cautious sentiment as a plunge in financial markets last week and dollar strength early this week underscored concerns that growth may be slowing, especially in Asia’s emerging economies.

Front-month Brent crude oil futures were trading down 39 cents, or 0.5 percent, at $77.23 a barrel at 0616 GMT.

U.S. West Texas Intermediate (WTI) crude futures were at $67.31 a barrel, down 28 cents, or 0.4 percent, from their last settlement.

Investors remained wary after hefty losses last week, while a stronger dollar on safe-haven buying puts pressure on the purchasing power of emerging markets.

“Cooling economic conditions and symptoms of softer international trade have exacerbated bearish conditions as (the) growth outlook dims,” said Benjamin Lu of brokerage Phillip Futures in Singapore.

Singapore-based ship tanker brokerage Eastport said stock prices were falling amid policy uncertainty, rising interest rates and disappointing earnings from some companies.

Financial market turmoil may “weigh on investment and consumer spending, reducing trade flows and ultimately hitting demand,” it said.

Hedge funds slashed their bullish wagers on U.S. crude in the latest week to the lowest level in more than a year, the U.S. Commodity Futures Trading Commission said on Friday.

The speculator group cut its combined futures and options position in New York and London by 42,644 contracts to 216,733 in the week to Oct. 23, the lowest level since September 2017.

There were also signs of a slowdown in global trade, with rates for dry-bulk and container ships – which carry most raw materials and manufactured goods – coming under pressure.

On the supply side, however, oil markets remain tense ahead of looming U.S. sanctions against Iran’s crude exports, which are set to start next week and are expected to tighten supply, especially to Asia which takes most of Iran’s shipments.

The tight market in Asia is visible in the low amount of unsold crude oil stored on tankers on waters around Singapore and southern Malaysia, the region’s main oil trading and storage hub.

Just four stationary supertankers are currently filled with crude oil, according to Refinitiv Eikon ship tracking data.

That’s down from around 15 a year ago, and from 40 in mid-2016 during the peak of the supply glut.

In North America, however, there is no oil shortage as U.S. crude oil production has increased by almost a third since mid-2016 to around 11 million barrels per day.

Production is set to rise further. U.S. drillers added two oil rigs in the week to Oct. 26, bringing the total count to 875, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

More than half of all U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, the country’s biggest shale oil formation.

Oil prices fall one percent amid global stock market slump

CNBC

  • Oil markets remain cautious ahead of U.S. sanctions on Iran’s crude exports which go into effect from Nov. 4.

Oil prices fell by around one percent on Thursday, coming under pressure from sharp selloffs in global stock markets, with U.S. stocks posting the biggest daily decline since 2011 to wipe out the year’s gains.

Front-month Brent crude oil futures were at $75.42 a barrel at 0043 GMT, 75 cents, or 1 percent, below their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $66.23 a barrel, 59 cents, or 0.9 percent, below their last settlement.

“Oil prices fell under extreme selling pressure … as the steep selloff across stock markets fuelled fears over a possible drop in oil demand growth,” said Lukman Otunuga, analyst at futures brokerage FXTM.

Markets have been hit hard this month by a range of worries, including the Sino-U.S. trade war, a rout in emerging market currencies, rising borrowing costs and bond yields, as well as economic concerns in Italy.

In oil, WTI has fallen nearly 10 percent so far this month, while Brent is down nearly 9 percent.

Still, oil markets remain nervous ahead of U.S. sanctions against Iran’s crude exports, which kick in from Nov. 4.

Bowing to pressure from Washington, China’s oil-majors Sinopec and China National Petroleum Corp (CNPC) have not ordered any oil from Iran for November because of concerns that violating sanctions could impact their global operations.

China is Iran’s biggest oil customer. Halting oil Iranian imports means its many refiners will have to seek alternative supplies elsewhere.

Some relief could come from the United States, where crude production and storage levels are high.

U.S. commercial crude oil stockpiles rose for a fifth consecutive week last week, increasing by 6.3 million barrels to 422.79 million barrels, the Energy Information Administration said on Wednesday.

Output remained unchanged at 10.9 million barrels per day (bpd), slightly below a record 11.2 million bpd reached at the start of October.