Oil prices inch higher on US stockpile drop, but bleak outlook caps gains

CNBC

Reuters
KEY POINTS
  • Brent crude futures were up 6 cents, or 0.2%, at $29.25 per barrel at 0401 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.7%, to $25.47 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 were lifted on Thursday by an unexpected drop in U.S. crude stocks, but gains were capped by both a bleak outlook for the world’s no. 1 economy as the coronavirus pandemic crushes fuel demand and concern over a potential second wave of cases.

Brent crude futures were up 6 cents, or 0.2%, at $29.25 per barrel at 0401 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.7%, to $25.47 a barrel.

Prices have risen in the past two weeks as some countries relaxed coronavirus restrictions and lockdowns to allow factories and shops to open again. But new cases have emerged in South Korea and China, raising concerns over a possible second wave of infections which would weigh on economic recovery and fuel demand.

U.S. Federal Reserve Chairman Jerome Powell warned on Wednesday of an “extended period” of weak economic growth and called for additional fiscal spending to stave off the fallout from the virus.

“It is hard to get excited about a steady rebound for crude demand when the world’s largest economy has significant uncertainty about the outlook and big downside risks,” said Edward Moya, senior market analyst at OANDA.

A drop in U.S. crude inventories provided some support to prices early in the trading session, but Moya said much bigger drawdowns over the next few weeks would be needed to boost prices.

U.S. crude inventories fell by 745,000 barrels to 531.5 million barrels in the week to May 8, marking the first decline since January, the Energy Information Administration said on Wednesday. Analysts in a Reuters poll had forecast a 4.1 million barrel increase.

Amid the slump in fuel use, the Organization of Petroleum Exporting Countries (OPEC) said on Wednesday it expects 2020 global oil demand to shrink by 9.07 million bpd, worse than its previous contraction forecast of 6.85 million bpd. It said it also expected the second quarter to see the steepest decline in demand.

ING Economics said in a note the lowering of demand forecasts made for “bearing reading”.

”(Second-quarter) demand for OPEC oil is just 16.77 million bpd, well below OPEC output levels, even when full compliance of OPEC+ cuts are taken into consideration,” ING added.

OPEC+, a grouping of OPEC and other producers including Russia, agreed in April to curtail production by 9.7 million barrels per day (bpd) in May and June. Saudi Arabia, de facto leader of OPEC, also said it would cut its own output by an additional 1 million bpd to 7.5 million bpd starting in June.

Oil prices drop amid supply glut, fears of 2nd coronavirus wave

CNBC

Reuters
KEY POINTS
  • Brent crude futures were down 29 cents, or 0.9%, at $30.68 a barrel by 0431 GMT.
  • U.S. West Texas Intermediate crude futures fell 17 cents, or 0.7%, to $24.57 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 Monday as concern over a persistent glut and economic gloom caused by the coronavirus pandemic combined to cancel out support from supply cuts at some of the world’s top producers.

Brent crude futures were down 29 cents, or 0.9%, at $30.68 a barrel by 0431 GMT, while U.S. West Texas Intermediate crude futures fell 17 cents, or 0.7%, to $24.57 a barrel.

Both benchmarks have notched up gains over the past two weeks as countries have eased business and social lockdowns imposed to cope with the coronavirus and fuel demand has rebounded modestly. Oil production worldwide is also declining.

But possible signs of a second wave of coronavirus infections in northeast China and South Korea worried investors even as more countries started to pivot towards easing pandemic restrictions in moves that could support oil demand.

Goldman Sachs analysts said there was still concern that demand will stay weak in 2021, with worries about a second wave of Covid-19 cases and only a modest increase in personal or corporate travel.

Global oil demand has plummeted by about 30% as the coronavirus pandemic curtailed movement across the world, building up inventories globally.

Fears that the United States is running out of storage space triggered WTI prices crashing into negative territory last month, prompting some U.S. producers to slash output.

In a sign of that impact, the number of operating oil and gas rigs in the world’s largest oil producer fell to 74 in the week to May 8, a record low according to data released on Friday from energy services firm Baker Hughes going back to 1940.

“People are surprised by how quickly the U.S. is shutting in production and that’s exactly what we need in order to support prices,” said Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo.

“There’s another 10 days before the June contract expires … if the WTI contract can avoid a crash going into expiry, hopefully we’ve seen the bottom.”

Oil steadies as China imports rebound but glut weighs

CNBC

Reuters
KEY POINTS
  • Brent crude was up by 3 cents, or 0.1%, to $29.75 a barrel 0341 GMT, after dropping 4% on Wednesday.
  • U.S. West Texas Intermediate futures gained 4 cents, or 0.2%, to 24.03 a barrel, after declining more than 2% in the previous session.
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 steadied on Thursday as data showed China’s crude imports rebounded, but market watchers expect gains to be capped by the glut in supplies as the coronavirus pandemic crushes global fuel demand.

Brent crude was up by 3 cents, or 0.1%, to $29.75 a barrel 0341 GMT, after dropping 4% on Wednesday.

U.S. West Texas Intermediate futures gained 4 cents, or 0.2%, to 24.03 a barrel, after declining more than 2% in the previous session.

Both contracts traded in an out of negative territory through the Asian morning on light trade with some markets on holiday.

Oil prices were supported by data showing Chinese crude imports rose last month. Imports climbed to 10.42 million barrels day (bpd) in April from 9.68 million bpd in March, according to Reuters calculations based on customs data for the first four months of 2020. Overall exports from China also rose against expectations of a sharp drop.

“Oil prices should eventually settle on a wide $10 range, with WTI crude’s upper boundary being around the $30 a barrel level, while Brent crude targets the $35 a barrel level,” said Edward Moya, senior market analyst at OANDA.

While prices have risen since late April as some countries have started easing lockdowns put in place to combat the worst pandemic in a century, oil continues to be pumped into storage, leaving a massive mismatch between demand and supply.

U.S. crude inventories were up for a 15th straight week last week, rising by 4.6 million barrels, the Energy Information Administration said on Wednesday.

That was less than analysts had forecast in a Reuters poll, which suggested a 7.8 million-barrel rise, but the gain highlighted once again how much supply is being stored. Distillate inventories also rose sharply.

Gasoline stocks, however, fell for a second week as some U.S. states eased lockdowns that had sharply hit traffic.

“The latest report (on U.S. inventories) added to tentative evidence that — after a catastrophic few weeks — the pressure on the U.S. oil market is beginning to lessen,” Capital Economics said in a note. “That said, we wouldn’t rule out more turbulence in the coming weeks.”

There are also signs that some oil producers are struggling to comply with an agreement between the members of the Organization of the Petroleum Exporting Countries (OPEC) and other suppliers, including Russia, to cut output by a record amount.

Iraq, OPEC’s second-largest producer after Saudi Arabia, has not yet informed customers of impending restrictions on its oil exports.

OPEC and allied producers — a grouping known as OPEC+ — agreed to cut production from May 1 by around 10 million bpd to stabilize prices amid the plunge in demand in economies ravaged by the coronavirus outbreak.

Oil prices stabilize, set for weekly gain on hopes for supply cut

CNBC

Reuters
KEY POINTS
  • Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.
  • U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were steady on Friday, but set for their first weekly gain in six weeks on the assumption that major producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic.

Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.

U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.

“Oil prices appear to have stabilised this week on optimism that OPEC+ will once again do whatever it takes to tighten output and on hope that the coronavirus peak is nearing,” said Edward Moya, senior market analyst at OANDA in New York.

Crude prices have plunged about 20% from their 2020 peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country’s quarantine to fight the coronavirus outbreak has stymied economic activity.

In response to the demand slump, the Organization of the Petroleum Exporting Countries (OPEC) and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day.

“Sentiment remains cautious across Asia-Pacific region, due to virus uncertainty,” said Margaret Yang, market analyst at CMC Markets, adding that the extent of the virus-led global oil demand destruction remained unclear.

But other analysts caution the demand impact is only limited to China so far.

“The spread of the coronavirus remains extremely fluid and while market sentiment is held at the mercy of each passing coronavirus headline, our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand,” said Helima Croft, head of commodity strategy at Citadel Magnus.

The market is signalling that some near-term demand for oil remains. The spread between the first-month April Brent future and the May contract has narrowed to a discount of only 1 cent a barrel on Friday from a discount of 33 cents a week ago.

The narrowing of this contango — a market situation that occurs when prompt prices are less than later-dated contracts — suggest that demand for oil is improving for Brent-related crude.

Still, some concern remains about the impact the Chinese demand slowdown may have.

The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China.

Oil climbs after Russia backs possible output cuts to counter coronavirus impact on demand

CNBC

Reuters
KEY POINTS
  • Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.
  • A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices rose on Friday after Russia said it backs a recommendation for the OPEC and its producer allies to deepen output cuts amid contracting demand for crude as China battles the coronavirus epidemic that has hit global markets.

Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday. U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.

A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.

“We support this idea,” said Sergei Lavrov, Russia’s Foreign Minister, when asked about the proposal at a news conference in Mexico City later in the day.

Oil prices have fallen by more than a fifth since the outbreak of the virus in the city of Wuhan in China.

Chinese President Xi Jinping declared a “people’s war” on the epidemic as China’s Hubei province, where Wuhan is located, reported 69 new deaths, taking the total in the country to more than 600.

“The impact of the coronavirus on the oil market remains largely a Chinese demand story with weakening jet fuel demand and economic run cuts, but demand destruction outside of China has been minimal, for now,” RBC Capital Markets analysts said in a note.