US oil prices edge up as market eyes tighter supply

CNBC

  • U.S. oil prices inched up on Tuesday, buoyed by expectations of tightening global supply due to U.S. sanctions on Venezuela and production cuts led by OPEC.
  • U.S. West Texas Intermediate (WTI) crude futures were at $54.77 per barrel at 0223 GMT, up 21 cents or 0.4 percent.
  • International Brent crude oil futures were at $62.72 a barrel, also up 21 cents or 0.4 percent, after closing down 0.4 percent in the previous session.

Oil pumps are seen in Lake Maracaibo, in Lagunillas, Ciudad Ojeda, in the state of Zulia, Venezuela.

Isaac Urrutia | Reuters
Oil pumps are seen in Lake Maracaibo, in Lagunillas, Ciudad Ojeda, in the state of Zulia, Venezuela.

U.S. oil prices inched up on Tuesday, buoyed by expectations of tightening global supply due to U.S. sanctions on Venezuela and production cuts led by OPEC.

U.S. West Texas Intermediate (WTI) crude futures were at $54.77 per barrel at 0223 GMT, up 21 cents or 0.4 percent. They closed down 1.3 percent on Monday, after earlier touching their highest since Nov. 21 at $55.75 a barrel.

International Brent crude oil futures were at $62.72 a barrel, also up 21 cents or 0.4 percent, after closing down 0.4 percent in the previous session.

Analysts said that U.S. sanctions on Venezuela had focused market attention on tighter global supplies.

“Fresh U.S. sanctions on the country could see 0.5-1 percent of global supply curtailed,” said Vivek Dhar, mining and energy analyst, Commonwealth Bank of Australia.

The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to but slightly less extensive than those imposed on Iran last year, experts said on Friday after looking at details posted by the Treasury Department.

With fresh sanctions potentially looming, a flotilla loaded with about 7 million barrels of Venezuelan oil has formed in the Gulf of Mexico, some holding cargoes bought ahead of the latest U.S. sanctions and others whose buyers are weighing who to pay, according to traders, shippers and Refinitiv Eikon data.

Meanwhile, oil supply from the Organization of the Petroleum Exporting Countries fell in January by the largest amount in two years, a Reuters survey found, as Saudi Arabia and its Gulf allies over-delivered on the group’s supply-cutting pact while Iran, Libya and Venezuela registered involuntary declines.

Russia has been in full compliance with its pledge to gradually cut its oil production, Russian Energy Minister Alexander Novak said in a statement on Monday, adding that production fell by 47,000 barrels per day (bpd) in January from October.

Oil rises 1 percent on supply cuts, but economic slowdown weighs on outlook

CNBC

  • Oil prices rose 1 percent on Tuesday amid supply cuts led by producer club OPEC and Russia, although a darkening economic outlook capped gains.
  • International Brent crude oil futures were at $59.64 per barrel at 0257 GMT, up 65 cents, or 1.1 percent, from their last close.
  • While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the United States hit a record 11.7 million barrels per day late last year.

Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Essam Al-Sudani | Reuters
Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,

Oil prices rose 1 percent on Tuesday amid supply cuts led by producer club OPEC and Russia, although a darkening economic outlook capped gains.

International Brent crude oil futures were at $59.64 per barrel at 0257 GMT, up 65 cents, or 1.1 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.09 per barrel, up 58 cents, or 1.2 percent.

“The impact of OPEC+ (OPEC and others including Russia) cuts, Iran sanctions and lower month-on-month growth in U.S. production should help to support oil prices from current levels,” U.S. bank J.P. Morgan said in a note.

The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, agreed in late 2018 to cut supply to rein in a global glut.

Meanwhile, the United States last November re-imposed sanctions against Iran’s oil exports. Although Washington granted sanctions waivers to Iran’s biggest oil customers, mostly in Asia, the Middle Eastern country’s exports have plummeted since.

“Iranian exports have already fallen sharply and are likely to remain at around 1.3 million barrels per day (bpd) in 2019, 1.3 million bpd down vs their 1H18 average,” HSBC said in its 2019 oil market outlook.

While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the United States hit a record 11.7 million bpd late last year.

The surging output increasingly allows U.S. oil producers to export crude, including to top importer China.

Three cargoes of U.S. crude are currently heading to China from the U.S.

Gulf Coast, the first departures since late September and a 90-day pause in the two countries’ trade war that began last month.

The tankers are scheduled to arrive at Chinese ports between late January and early March, according to shipbrokers and vessel tracking data.

Looming over oil and financial markets, however, is an economic slowdown.

Tuesday’s oil price increases came after crude futures fell by more than 2 percent the previous session, dragged down by weak Chinese trade data which pointed to a global economic slowdown.

“The outlook for the global economy continues to be highly uncertain,” HSBC said.

The bank said it had cut its average 2019 Brent crude oil price forecast by $16 per barrel, to $64 per barrel, citing surging U.S. production and an “increasingly uncertain demand backdrop”.

Brent crude prices fall below $60 on weak China trade data

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  • Brent crude oil prices fell below $60 per barrel on Monday after Chinese data showed weakening imports and exports in the world’s biggest trading nation.
  • China’s December exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official data showed on Monday, pointing to further weakening in the world’s second-largest economy. Imports also contracted, falling 7.6 percent, the biggest decline since July 2016.
  • Traders said the data pulled down crude oil futures and Asian stock markets alike, which had both posted modest gains earlier on Monday.

Brent crude oil prices fell below $60 per barrel on Monday after Chinese data showed weakening imports and exports in the world’s biggest trading nation.

International Brent crude oil futures were at $59.78 per barrel at 0312 GMT, down 70 cents, or 1.2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 63 cents, or 1.2 percent, $50.96 a barrel.

China’s December exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official data showed on Monday, pointing to further weakening in the world’s second-largest economy. Imports also contracted, falling 7.6 percent, the biggest decline since July 2016.

Traders said the data pulled down crude oil futures and Asian stock markets alike, which had both posted modest gains earlier on Monday.

Economic research firm TS Lombard said oil prices were capped as “the world economy is now slowing … limiting the scope for positive surprises in oil demand and hampering inventory reduction.”

Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said “the deterioration seen recently in forward-looking economic data from the U.S. to Europe and China” meant that the upside for crude oil futures was likely limited to $64 per barrel for Brent and for $55 for WTI.

The weak Chinese data countered general support that oil markets have been receiving since the start of the year from supply cuts from the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia.

In the United States, drillers cut four oil rigs in the week to Jan. 11, bringing the total count down to 873, energy services firm Baker Hughes said in a weekly report on Friday.

Oil weighed down by record Saudi output; markets await G20, OPEC meetings

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  • Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.
  • International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Ali Jarekji | Reuters
The Khurais oilfield operated by oil giant Saudi Aramco, about 160 km (99 miles) from Riyadh.

Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.

International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent.

Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.

Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe.

Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda.

OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.

In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production.

Despite this, most analysts expect OPEC to start withholding supply again soon.

“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank.

“If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.

“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.

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.

80848321DM012_High_Oil_Pric

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.