Oil edges higher amid tightening global supply, gains capped by economic slowdown

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures were at $70.66 per barrel at 0158 GMT, up 5 cents from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $64.10 per barrel, up 12 cents, or 0.2 percent, above their last settlement.
RT: Oil Iraq OPEC flames 161014
Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, October 14, 2016.
Essam Al-Sudani | Reuters

Oil prices crept higher on Wednesday, supported by supply cuts by producer club OPEC and U.S. sanctions against oil exporters Iran and Venezuela, but restricted by expectations that an economic slowdown could soon dent fuel consumption.

International benchmark Brent futures were at $70.66 per barrel at 0158 GMT, up 5 cents from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $64.10 per barrel, up 12 cents, or 0.2 percent, above their last settlement.

Both benchmarks hit five-month highs on Tuesday, before easing on global growth worries. [nL3N21S064]

Overall, oil markets have been tightened this year by U.S. sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, a group known as OPEC+.

As a result, Brent and WTI crude oil futures have risen by around 40 percent and 30 percent respectively since the start of the year.

“The global oil market is clearly moving back towards balance thanks to OPEC+ production cuts. OPEC production has fallen 1.98 million barrels per day (bpd) from October levels,” ING bank said in a note.

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices.

“Venezuelan oil output is estimated to have fallen from 1.19 million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33 million bpd to 2.71 million bpd due to sanctions. Declines from these two exempt countries account for almost 47 percent of the reduction seen from OPEC,” ING said.

Despite the OPEC-led cuts, not all regions are in tight supply.

Oil production in the United States has risen by more than 2 million barrels per day since early 2018, to a record 12.2 million bpd.

“WTI has not seen the same strength (as Brent)… given the relatively more bearish fundamentals in the U.S. market,” said ING bank.

“U.S. crude oil inventories remain stubbornly high,” it added.

U.S. crude stocks rose by 4.1 million barrels in the week to April 5, to 455.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.

On the demand side, there are concerns that an economic slowdown will soon hit fuel consumption.

The International Monetary Fund (IMF) warned on Tuesday that the global economy was slowing more than expected and that a sharp downturn may be looming.

In its third downgrade since October, the IMF said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016. The forecast cut 0.2 percentage point from the IMF’s outlook in January.

Oil slips from five-month highs as economic worries counter tight market

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures touched their strongest level since last November at $71.34 per barrel on Tuesday, before losing ground to $70.96 per barrel by 0158 GMT, down 14 cents, or 0.2%, from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures also hit a November 2018 high, at $64.77 per barrel, before easing to $64.36, 4 cents below their last settlement.
RT: Offshore oil rig Norway 160211
An offshore oil rig off the coast of Norway.
Nerijus Adomaitis | Reuters

Oil prices eased on Tuesday, slipping away from 5-month highs reached earlier in the session as a sluggish economic outlook countered an otherwise tight market.

International benchmark Brent futures touched their strongest level since last November at $71.34 per barrel on Tuesday, before losing ground to $70.96 per barrel by 0158 GMT, down 14 cents, or 0.2%, from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures also hit a November 2018 high, at $64.77 per barrel, before easing to $64.36, 4 cents below their last settlement.

Despite generally bullish oil markets, concerns that an economic slowdown this year will hit fuel consumption have been preventing crude prices from rising even higher, traders said.

And while fears of a global recession ebbed following strong U.S. jobs figures and improved Chinese manufacturing data late last week, Bank of America Merrill Lynch said there was still a “significant slowing in growth globally” in 2019.

The bank said it expects Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.

Despite the economic concerns, global oil markets are tight, and Brent and WTI crude oil futures have risen by 40% and 30% respectively since the start of the year.

“Renewed fighting in Libya … has seen Brent crude break above $70 per barrel, ” said Ole Hansen, head of commodity strategy at Saxo Bank.

Libya is a significant supplier of oil to Europe, producing around 1.1 million barrels per day (bpd) of crude in March.

A warplane attacked Tripoli’s only functioning airport on Monday as eastern forces advancing on the Libyan capital disregarded international appeals for a truce in the latest of a cycle of warfare since Muammar Gaddafi’s fall in 2011.

Hansen said the fighting in Libya added to an already tense market, which has been tightened this year by U.S. sanctions on oil exporters Iran and Venezuelaas well as supply cuts led by the producer club of the Organization of the Petroleum Exporting Countries (OPEC).

Oil at five-month highs amid OPEC-led supply cuts, US sanctions

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures were at $70.72 per barrel at 0225 GMT on Monday, up 38 cents, or 0.5 percent from their last close.
  • U.S. West Texas Intermediate (WTI) crude were up 37 cents, or 0.6 percent, at $63.45 per barrel.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices rose to their highest level since Nov. 2018 on Monday, driven up by OPEC’s ongoing supply cuts, U.S. sanctions against Iran and Venezuela and strong U.S. jobs data.

International benchmark Brent futures were at $70.72 per barrel at 0225 GMT on Monday, up 38 cents, or 0.5 percent from their last close.

U.S. West Texas Intermediate (WTI) crude were up 37 cents, or 0.6 percent, at $63.45 per barrel.

Brent and WTI both hit their highest levels since November last year at $70.76 and $63.48 per barrel, respectively, early on Monday.

“Brent prices increased more than 30 percent year-to-date as OPEC+ continued to cut supply for 4 months in a row and optimism over U.S.-Chinatrade talks helped to buoy the demand outlook, ” U.S. bank J.P.Morgan said in a note released over the weekend.

The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia, known as OPEC+, have pledged to withhold around 1.2 million barrels per day (bpd) of supply this year to prop up prices.

Energy consultancy FGE said OPEC-led supply cuts meant “excess inventories are disappearing and the market looks healthy,” adding that “the market is poised for prices to rise to $75 per barrel or higher” for Brent.

Traders said strong U.S. jobs data from Friday also helped lift Asian markets early on Monday.

Oil prices have further been driven up by U.S. sanctions against OPEC-members Iran and Venezuela.

“Sanctions can cut 500,000 bpd of Venezuelan exports. Add that to a cut in Iran waivers and prices can rise substantially,” FGE said.

There remain, however, some factors that could bring prices down later this year.

Russia is a reluctant participant in its agreement with OPEC to withhold output, and Russian oil production may increase again if a deal with the producer club is not extended once it expires before July 1, Energy Minister Alexander Novak said on Friday.

Russian oil output reached a record high of 556 million tonnes, or 11.16 million barrels per day (bpd), last year.

In the United States, crude oil production reached a record 12.2 million bpd in late March.

U.S. crude exports have also risen, breaking through 3 million bpd for the first time earlier this year.

“With the new Permian pipelines (from July), we can see a boost of 500,000 to 600,000 bpd in U.S. exports,” FGE said.

There also still remain concerns about the health of the global economy, especially should China and the United States fail to resolve their trade dispute soon.

“Global (trade) demand has weakened, and existing tariffs on Chinese goods shipments to the U.S. are providing an additional drag,” credit rating agency Moody’s said on Monday, although it added that Chinese monetary stimulus measures would likely support growth over 2019.

Oil prices dip amid economic concerns, but on track for weekly gain

TOKYO (Reuters) – Oil prices fell on Friday, with Brent slipping away from the $70 mark reached the previous day, pulled down by worries about progress in the U.S.-China trade talks.

International benchmark Brent futures dropped 15 cents, or 0.2 percent, to $69.25 a barrel by 0455 GMT, having touched $70.03 in the previous session, the highest since Nov. 12.

U.S. West Texas Intermediate (WTI) crude was down 1 cent at $62.09. The contract fell 36 cents in the previous session, having hit $62.99 on Wednesday, its highest since Nov 7.

Weighing on prices are concerns that an economic slowdown could dent fuel consumption, traders said.

The United States and China, the world’s two biggest oil consumers, could be close to a deal to end their trade dispute though some hurdles remain.

U.S. President Donald Trump on Thursday said the two sides were “very close to making a deal,” though the United States remains hesitant to lift $250 billion in tariffs that China is seeking to have removed.

Prices for thermal coal and natural gas, the main power generation fuels, have already fallen sharply amid a marked slowdown in consumption.

Still, Brent is heading for a second week of gains, while WTI is on track for a fifth consecutive weekly rise.

Brent has gained nearly 30 percent this year, while WTI has risen nearly 40 percent, underpinned by production cuts and U.S. sanctions against Iran and Venezuela.

The Organization of the Petroleum Exporting Countries (OPEC) and producer allies such as Russia, together known as OPEC+, agreed to cut output by 1.2 million barrels per day (bpd) this year to prop up prices.

Consultancy Rystad Energy said ongoing OPEC-led supply cuts would support oil prices towards the second half of this year and into 2020.

“We retain our bullish stance for the second half of 2019 and first half of 2020 as we anticipate OPEC+ to extend production cuts through 2019, while we also expect bullish oil market effects due to the introduction of IMO 2020 regulations on sulfur content in marine fuels,” said Bjornar Tonhaugen, head of oil market research at Rystad.

The International Maritime Organization (IMO) will mandate all shippers use fuel with a reduced sulfur content, resulting in a sharp increase in diesel consumption and the use of low-sulfur fuel oil.

Somewhat undermining the OPEC-led efforts to prop up the market is surging U.S. oil production, which according to official data rose to a record 12.2 million bpd last week.

As a result, U.S. crude oil stockpiles soared last week, the Energy Information Administration said on Wednesday.

Reporting by Aaron Sheldrick in TOKYO and Henning Gloystein in SINGAPORE; editing by Richard Pullin and Christian Schmollinger

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.