Oil near six-week highs amid Gulf of Mexico storm, Middle East tensions

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KEY POINTS
  • Brent crude futures were up 29 cents, or 0.4%, at $66.81 per barrel by 0300 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, or 0.5%, at $60.51 a barrel.
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An oil refinery in Pascagoula, Miss.
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Oil prices rose on Friday, hovering near six-week highs, as U.S. oil producers in the Gulf of Mexico cut more than half their output in the face of a tropical storm and as tensions continued to simmer in the Middle East.

Brent crude futures were up 29 cents, or 0.4%, at $66.81 per barrel by 0300 GMT. The international benchmark settled down 0.7% on Thursday after hitting its highest since May 30 at $67.52 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, or 0.5%, at $60.51 a barrel. The U.S. benchmark marked its highest level since May 23 in the previous session at $60.94.

By Thursday, oil companies in the Gulf of Mexico had cut more than 1 million barrels per day (bpd) of output, or 53% of the region’s production, due to Tropical Storm Barry which could make landfall Saturday on the Louisiana coast.

The storm was forecast to become a category one hurricane with at least 74-mile-per hour (119 km-per-hour) winds.

“Brent crude oil … extended its gains as storms in the Gulf of Mexico halted production of oil and U.S. oil inventories continued to recede more than expected,” ANZ Bank said in a note.

U.S. crude oil inventories have decreased for four consecutive weeks. Crude stocks fell 9.5 million barrels in the week to July 5, the Energy Information Administration (EIA) said, a drop that was more than triple the 3.1 million-barrel draw expected by analysts.

Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul, said a sharp drop in U.S. crude stocks and geopolitical risks are expected to keep both Brent and WTI at current levels.

“As geopolitical risks involving Iran are likely to persist, that would support WTI to stay above $60 a barrel, while Brent is expected to stay above $65 per barrel but below $70 for the time being, ” Kim said.

Iran’s alleged attempt to block a British-owned tanker heightened tensions in the Middle East in the wake of attacks on tankers and the downing of U.S. drone by Iran in June.

“While a full-scale military conflict remains the least likely scenario, the strong increases for cost of insurance will make for a most costly transportation of crude and see new routes explored, delaying crude arrivals,” said Edward Moya, senior market analyst at OANDA in New York.

But a lower 2020 oil demand outlook from the Organization of the Petroleum Exporting Countries kept price gains in check. OPEC said the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.

Oil prices tread water as market eyes global risks

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KEY POINTS
  • Brent crude futures were down 3 cents by 0300 GMT at $64.20.
  • U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.
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Jason Reed | Reuters

Crude prices were little changed on Monday as traders weighed geopolitical risks against the impact of the Sino-U.S. trade war on the global economy, although last week’s better-than-expected U.S. jobs data offered some support.

Brent crude futures were down 3 cents by 0300 GMT at $64.20. U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.

“A very cautious open this morning supported by a better than expected (non-farm payrolls),” said Stephen Innes, managing partner at Vanguard Markets in Bangkok. “Traders remain incredibly cautious about the dimmer global economic overhang.”

Both oil benchmarks fell last week as concerns about a slowing global economy outweighed risks to supply. Brent fell more than 3% and WTI shed more than 1.5%.

U.S. job growth rebounded strongly in June, with government payrolls surging, the Labor Department’s closely watched employment report showed on Friday, suggesting May’s sharp slowdown in hiring was probably a one-off.

Employers added 224,000 jobs last month, the most in five months, the report showed.

But the U.S.-China trade war has dampened prospects of global economic growth and oil demand.

The lack of concrete progress in resolving the acrimonious trade war between the United States and China, however, means the bar could be very high for the U.S. Federal Reserve not to lower borrowing costs at its July 30-31 policy meeting.

White House Economic advisor Larry Kudlow has confirmed top representatives from the United States and China will meet in the coming week to continue trade talks.

Still, Japan’s core machinery orders fell for the first time in four months in May, posing the biggest monthly drop in eight months in a worrying sign that global trade tensions are taking a toll on corporate investment.

Oil received some support from simmering tensions over Iran and after an extension last week to output cuts by OPEC and its allies.

Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from U.S. President Donald Trump, who pulled out of the pact last year.

“Geopolitical risks remain plentiful, but the start of the week could see Iran worries ease,” said Edward Moya, senior market analyst at OANDA.

Meanwhile, U.S. energy companies this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Crude oil prices fall amid fears about global economy

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KEY POINTS
  • U.S. West Texas Intermediate crude futures were down 1.1% at $56.72 per barrel by 0310 GMT. There was no settlement price on Thursday because of the Independence Day holiday in the United States.
  • Front-month Brent crude futures were down 0.1% at $63.25 per barrel, after closing down 0.8% on Thursday.
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Rusted out “pump-jacks” in the oil town of Luling, Texas.
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Crude oil prices fell on Friday as concerns over the outlook for global economic growth outweighed elevated tensions in the Middle East that could disrupt supply routes and send prices higher.

U.S. West Texas Intermediate (WTI) crude futures were down 1.1% at $56.72 per barrel by 0310 GMT. There was no settlement price on Thursday because of the Independence Day holiday in the United States.

Front-month Brent crude futures were down 0.1% at $63.25 per barrel, after closing down 0.8% on Thursday.

Analysts said oil was under pressure because fears over future demand amid trade disputes threatening global economic growth. But losses were checked by commitment to cut production from the world’s largest exporters – including members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a grouping known as OPEC+.

“Global growth remains the main factor holding back crude prices,” said Alfonso Esparza, senior analyst at OANDA. “The OPEC+ deal will keep prices from falling too hard, but there must be an end to trade protectionism to assure the demand for energy products recovers.”

New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, stoking economic concerns.

The U.S. Energy Information Administration on Wednesday reported a weekly decline of 1.1 million barrels in crude stocks, much smaller than the 5 million barrel draw reported by the American Petroleum Institute earlier in the week.

That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy.

Countering the downward pressure, ongoing tensions in the Middle East also offered some support.

British Royal Marines seized a giant Iranian oil tanker in Gibraltar on Thursday for trying to take oil to Syria in violation of EU sanctions, a dramatic step that drew Tehran’s fury and could escalate its confrontation with the West.

Oil prices fall amid signs of slowing US demand, economic concerns

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KEY POINTS
  • Front-month Brent crude futures were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.
  • U.S. West Texas Intermediate crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices fell more than 0.5% on Thursday, weighed down by data showing a smaller-than-expected decline in U.S. crude stockpiles and worries about the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.

U.S. crude inventories dropped by 1.1 million barrels last week, the Energy Information Administration (EIA) said on Wednesday. That compared with analyst expectations for a decrease of 3 million barrels.

Inventories fell less than expected as U.S. refineries last week consumed less crude than the week before and processed 2% less oil than a year ago, the EIA data showed, despite being in the midst of the summer gasoline demand season.

That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy. New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, adding to the economic concerns.

The weak U.S. data followed a report of slow business growth in Europe last month as well.

“Tossing aside the short-term nature of fluctuations around the inventory data, it’s impossible to escape the economic reality that we are in the midst of a global manufacturing downturn,” said Stephen Innes, managing partner, Vanguard Markets.

The weakness in oil was offset slightly by the outlook for global supplies.

U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Drillers cut five oil rigs in the week to July 3, bringing the total count down to 788, General Electric Co’s GE.N Baker Hughes energy services firm said in its closely followed report on Wednesday.

Global supply is also expected to contract as the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil production cuts until March 2020.

Oil prices steady, focus turns to G-20 gathering

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Reuters

KEY POINTS
  • Brent crude futures were up 5 cents, or 0.08%, at $66.60 per barrel by 0043 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were down 2 cents, or 0.03%, at $59.41 a barrel.
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Sergei Karpukhin | Reuters

Oil prices were steady on Friday, with focus shifting to the G20 summit where a scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping has stirred hopes that trade tensions could ease.

Brent crude futures were up 5 cents, or 0.08%, at $66.60 per barrel by 0043 GMT.

U.S. West Texas Intermediate (WTI) crude futures were down 2 cents, or 0.03%, at $59.41 a barrel.

The leaders of the G20 countries meet on Friday and Saturday in Osaka, Japan, but the most anticipated meeting is between Trump and Xi on Saturday.

A trade dispute between the world’s two biggest economies has weighed on oil prices, fanning fears that slowing economic growth could dent demand for the commodity.

“While there are no expectations of a truce between the two parties, it will set the scene for the OPEC meeting a couple of days later,” ANZ Bank said in a note.

Trump said on Wednesday a trade deal with Chinese President Xi was possible this weekend but he is prepared to impose U.S. tariffs on most remaining Chinese imports should the two countries disagree. [nL2N23X1WK]

“Even if U.S.-China trade talks turn positive, we think OPEC will extend the current production cuts until the end of the year. However, deeper cuts look unlikely, given the rising supply issues, ” ANZ said.

The Organization of Petroleum Exporting Countries (OPEC) and some non-members including Russia, known as OPEC+, will hold meetings on July 1-2 in Vienna to decide whether to extend their supply cuts.

OPEC+ agreed to curb their oil output by 1.2 million barrels per day from Jan.1.

Russian President Vladimir Putin said in an interview with the Financial Times on Thursday that the OPEC-led supply cut helped stabilize oil markets and the future of the output deal was expected to be on the agenda at the G20 summit.

Tensions between the United States and Iran have also been keeping markets on edge.

A week after U.S. President Donald Trump called off air strikes on Iran at the last minute, the prospect that Tehran could soon violate its nuclear commitments has created additional diplomatic urgency to find a way out of the crisis.