Oil prices fall amid supplied market, Iran sanction exemptions

CNBC

  • Oil prices fell on Wednesday, extending losses from the previous session, with markets well supplied amid rising production and U.S. sanction waivers that allow Iran’s biggest customers to continue buying its crude.
  • Front-month Brent crude oil futures were at $71.85 per barrel at 0115 GMT, down 28 cents, or 0.4 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.76 per barrel, down 45 cents, or 0.7 percent, from their last settlement.

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David McNew | Getty Images

Oil prices fell on Wednesday, extending losses from the previous session, with markets well supplied amid rising production and U.S. sanction waivers that allow Iran’s biggest customers to continue buying its crude.

Front-month Brent crude oil futures were at $71.85 per barrel at 0115 GMT, down 28 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $61.76 per barrel, down 45 cents, or 0.7 percent, from their last settlement.

The increasingly well supplied market has turned sentiment, which until early October was largely bullish, pushing Brent to four-year highs of more than $86 per barrel ahead of the Iran sanctions.

Brent and WTI have lost 17.4 and 19.7 percent in value respectively from their most recent peaks in early October.

U.S. bank J.P. Morgan said “part of the recent sell-off in oil was due to excessive crude in the physical markets…from elevated production from OPEC whilst Iranian supply was still in the market despite reduction in reported exports.”

Fawad Razaqzada, market analyst at futures brokerage Forex.com, said he had become “quite bearish on oil prices” due to lower demand growth forecasts, higher supply and Iran sanctions waivers.

According to Refinitiv Eikon data, Iranian crude exports have fallen to 1 million barrels per day (bpd) so far in November, down from almost 2 million bpd in October and around 3 million bpd in mid-2018.

U.S. bank Morgan Stanley said “oil market fundamentals have softened (as) supply continues to come in higher-than-expected, particularly from the U.S., Middle East OPEC, Russia and Libya.”

Output from the world’s top-3 producers Russia, the United States and Saudi Arabia, broke through 33 million bpd for the first time in October, meaning these three countries alone now meet more than a third of the almost 100 million bpd of global consumption.

Iraq, the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia, is targeting production capacity of 5 million bpd in 2019, up from 4.6 million bpd currently, Oil Minister Thamer Ghadhban said on Tuesday.

“The market is well supplied, and we see a balanced rather than tight market ahead. This no longer supports our $85 per barrel year-end and 1H19 forecast,” Morgan Stanley said.

Instead, the bank said it expected Brent to average around $77.5 per barrel to mid-2019.

With production rising, inventories are swelling.

U.S. crude stocks climbed by 7.8 million barrels in the week ending Nov. 2 to 432 million, data from the American Petroleum Institute showed on Tuesday.

Despite the well supplied market, Razaqzada warned that it would be “increasingly costly for inefficient producers to maintain output at current levels”.

Venezuela’s crude production was in “free-fall” and could soon drop below 1 million bpd, the International Energy Agency’s Executive Director Fatih Birol warned on Tuesday, down from the more than 2 million bpd it averaged last year.

Oil markets mixed as US crude, Brent move in opposite directions

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  • Oil markets were split on Tuesday, with U.S. crude pushed up by reduced flows from Canada.
  • Traders said the higher WTI prices were a result of reduced flows from Canada’s Keystone pipeline.
  • Brent crude prices eased on Tuesday.

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Oil markets were split on Tuesday, with U.S. crude pushed up by reduced flows from Canada while international Brent prices eased.

U.S. West Texas Intermediate (WTI) crude futures were at $62.38 a barrel at 0518 GMT, up 70 cents, or 1.1 percent, from their last settlement.

Traders said the higher WTI prices were a result of reduced flows from Canada’s Keystone pipeline, which has been operating below capacity since late last year due to a leak, cutting Canadian supplies into the United States.

Outside North America, Brent crude eased on the back of a dip in Asian stocks and a stronger dollar, which potentially curbs demand as it makes fuel more expensive for countries using other currencies domestically.

Brent crude futures were at $65.48 per barrel, down 19 cents, or 0.3 percent, from their last close.

The opposing price direction of the two main crude benchmarks has sharply reduced WTI’s discount to Brent, to around $3.22 per barrel on Tuesday, down from over $7 in late 2017.

Overall, oil markets remain well supported due to supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), which started last year in order to draw down excess global inventories.

OPEC Secretary-General Mohammad Barkindo said on Monday the organisation registered 133 percent compliance with agreed output reduction targets in January.

Barkindo said compliance last year stood at 107 percent.

Global oil demand for 2018 is estimated to grow 1.6 million barrels per day due to an “encouraging environment”, Barkindo added.

Geopolitical risk has heightened as a factor in crude oil prices

Geopolitical risk has heightened as a factor in crude oil prices  

“OPEC and Russia continue to support the production cuts that are due to expire at the end of this year, and they assure markets that there will be an orderly ramp up of production once the cuts expire,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

While most of OPEC, especially its de-facto leader Saudi Arabia, is showing strong support for the production restraint, non-OPEC producer Russia has shown signs it may at some stage gradually start to increase output again.

Saudi Arabia – not least in an attempt to give the planned listing of its state-owned oil giant Saudi Aramco – a boost, is keen for Russia and other producers to keep withholding supplies to prop up prices.

But soaring U.S. production is threatening to erode OPEC’s efforts.

Last week, the amount of U.S. oil rigs drilling for new production rose for a fourth straight week to 798, in an indication that U.S. crude output, already at a record 10.27 million bpd, may rise further.

The United States late last year became the world’s second biggest oil producers, only slightly behind Russia and ahead of top exporter Saudi Arabia.

Oil hits highest level in nearly two weeks on Asian equity recovery

CNBC

  • Oil prices extended gains to hit their highest level in nearly two weeks on Monday, buoyed by a recovery in Asian shares and by worries over tensions in the Middle East.
  • The U.S. oil rig count, an indicator of future production, rose by seven to 798, its highest since April 2015, according to a weekly report from General Electric’s Baker Hughes unit.
  • Speculators also cut net long U.S. crude futures and options positions in the week to Feb. 13 by the most since late August, the U.S. Commodity Futures Trading Commission (CFTC) said.

Oil prices extended gains to hit their highest level in nearly two weeks on Monday, buoyed as Asian shares joined a global recovery in equity markets and by worries over tensions in the Middle East.

Prime Minister Benjamin Netanyahu said on Sunday that Israel could act against Iran itself, not just its allies in the Middle East, after border incidents in Syria brought the Middle East foes closer to direct confrontation.

U.S. West Texas Intermediate crude for March delivery was up 74 cents, or 1.2 percent, at $62.42 a barrel by 0217 GMT, after earlier touching its highest since Feb. 7.

London Brent crude was up 46 cents, or 0.7 percent, at $65.30, after rising more than 3 percent last week.

“The upside momentum since WTI hit last week’s low of $58 has been continuing,” said Tetsu Emori, CEO of Emori Capital Management in Tokyo.

“Oil got mild support from gains in Asian equity markets, but has been getting pressure from the rise in U.S. rig count and a slight recovery in the dollar.”

Trading is expected to be slower than usual due market holidays in the United States as well as Greater China and India.

The U.S. oil rig count, an indicator of future production, rose by seven to 798, its highest since April 2015, according to a weekly report from General Electric’s Baker Hughes unit.

That marked the first time since June that drillers added rigs for four consecutive weeks, and the figure was well up on the 597 rigs that were active a year earlier as energy companies have boosted spending since mid-2016 when crude prices began recovering from a two-year crash.

Surging U.S. production is offsetting efforts by the Organization of the Petroleum Exporting Countries (OPEC) and some other producers including Russia to curb production by 1.8 million barrels per day (bpd) until the end of 2018.

Money managers slashed their bullish wagers on ICE Brent crude oil futures by the most in nearly eight months in the week to Feb. 13, data showed, as prices plunged amid concerns of oversupply.

Speculators also cut net long U.S. crude futures and options positions in the week to Feb. 13 by the most since late August, the U.S. Commodity Futures Trading Commission (CFTC) said.

Oil prices hold near 2015 highs, but doubts over rally emerge

CNBC

  • Brent has risen by more than 10 pct since December
  • Oil has been supported by OPEC-led cuts, strong economic growth
  • Tensions in OPEC-member Iran have also lifted oil prices
  • But soaring U.S. crude production could undermine rally

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 prices held firm on Friday, with Brent crude up by more than 10 percent from its December lows on the back of political tensions in OPEC-member Iran and a tightening U.S. market.

U.S. West Texas Intermediate (WTI) crude futures were at $61.95 a barrel at 0151 GMT, 5 cents below their last close but not far off the $62.21 May 2015 high reached the previous day.

Brent crude futures were at $68.03 a barrel, 4 cents below their last settlement, but not far off the $68.27 high from the day before, also the highest since May 2015.

Beyond a brief intraday spike in May 2015, these were the highest price levels since December 2014, during the oil price downturn.

Traders said political tensions in oil producing Iran were supporting prices.

Oil prices to drop by Oscar season, OPIS' Tom Kloza warns

Oil prices to drop by Oscar season, OPIS’ Tom Kloza warns  

“The protests in Iran add more fuel to the already bullish oil market mood,” said Norbert Ruecker, head of commodity research at Swiss Bank Julius Baer.

Oil prices have been supported by production cuts led by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) and by Russia, which started in January last year and are set to last through 2018, as well as by strong economic growth and financial markets.

This has helped tighten markets. U.S. Commercial crude inventories fell by 7.4 million barrels in the week to Dec. 29, to 424.46 million barrels, according to data from the Energy Information Administration (EIA).

That’s down 20 percent from their historic peaks last March and close to the five-year average of 420 million barrels.

Can the bull-run last?

Given that Iran’s oil production has not been affected by the unrest, and that U.S. production will likely break through 10 million barrels per day (bpd) soon, a level so far only reached by Saudi Arabia and Russia, doubts are emerging whether the bull-run can last.

“Prices above $60 per barrel project an overly rosy picture, so we see near-term downside,” Ruecker warned.

“Oil production disruptions (in Iran) remain a very distant threat …Disruptions in the North Sea have been removed with the Forties Pipeline system having resumed full operations. U.S. oil production surpassed the 2015 highs in October and is set to climb to historic highs this year,” he said.

Lukman Otunuga, analyst at futures brokerage FXTM, struck a similarly cautious tone.

“Oil started the New Year on an incredibly bullish note … in part due to ongoing tensions in Iran … (and) over OPEC’s supply cut rebalancing the markets,” he said.

“While the current momentum suggests that further upside is on the cards, it must be kept in mind that U.S. shale remains a threat to higher oil prices.”