Oil slips after Saudi Arabia says to restore output but risks remain

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Reuters
KEY POINTS
  • Brent crude oil futures fell 15 cents, or 0.2%, to $64.40 a barrel by 0253 GMT, after tumbling 6.5% the previous session.
  • U.S. West Texas Intermediate (WTI) crude futures declined 35 cents, or 0.6%, to $58.99 a barrel, after sinking by 5.7% on Tuesday.
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Foreign “guest workers” drill at the Saudi Aramco oil field complex facilities on March 2003 in Shaybah, Saudi Arabia.
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Oil prices slipped on Wednesday, extending losses from the previous session after Saudi Arabia’s energy minister said the kingdom will restore lost oil production by the end of the month.

But investors remained cautious about Middle East tension after the United States said it believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran. Iran has denied involvement in the strikes.

Brent crude oil futures fell 15 cents, or 0.2%, to $64.40 a barrel by 0253 GMT, after tumbling 6.5% the previous session.

U.S. West Texas Intermediate (WTI) crude futures declined 35 cents, or 0.6%, to $58.99 a barrel, after sinking by 5.7% on Tuesday.

“The risk of further escalation of conflict in the Middle East remains over the energy market and wild swings will likely resume when we see tit-for-tat responses from a Saudi-U.S. led coordinated effort,” said Edward Moya, senior market analyst at OANDA in New York.

“The situation with the oil market will remain tense, but the initial fears of a sustained disruption with world oil supplies have been alleviated in the very short-term.”

Saudi Arabia sought to reassure markets after the attack on Saturday halved its oil output, saying on Tuesday that full production would be restored by month’s end.

Energy Minister Prince Abdulaziz bin Salman said on Tuesday that average oil production in September and October would be 9.89 million barrels per day and that the world’s top oil exporter would ensure full oil supply commitments to its customers this month.

Saudi Aramco has informed some Asian refiners that it will supply full allocated volumes of crude oil in October, albeit with some changes.

Relations between the United States and Iran have deteriorated since U.S. President Donald Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

Tehran rejects the charges it was behind the strikes and on Tuesday ruled out talks with Trump.

Shell Petroleum Development Company of Nigeria declared force majeure on exports of Bonny Light crude oil, which put a floor on price losses on Wednesday.

In a note late on Tuesday, BNP Paribas’ Harry Tchilinguirian said “In view of the vulnerability of Saudi’s supply chain and the likelihood that such attacks could be repeated in the future, we expect the market to reprice the geopolitical risk premium in oil.”

But Moya said oil prices “will continue to struggle to maintain any sustained rally as global growth weakness continue to drive demand concerns”.

U.S. crude inventories rose by 592,000 barrels in the week ended Sept. 13 to 422.5 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a decrease of 2.5 million barrels.

Official U.S. government data will be released on Wednesday.

Oil surges as Saudi attack focuses market on supply risks

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Reuters
KEY POINTS
  • Benchmark Brent crude futures rose by as much as 19.5% to $71.95 per barrel, the biggest intra-day jump since Jan. 14, 1991.
  • U.S. West Texas Intermediate (WTI) futures climbed by as much as 15.5% to $63.34 a barrel, the biggest intra-day percentage gain since June 22, 1998.
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An oil well owned an operated by Apache Corporation in the Permian Basin is shown in Garden City, Texas, Feb. 5, 2015.
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Oil prices surged on Monday, with Brent crude posting its biggest intra-day percentage gain since the start of the Gulf War in 1991, after an attack on Saudi Arabian oil facilities on Saturday shut in the equivalent of 5% of global supply.

Benchmark Brent crude futures rose by as much as 19.5% to $71.95 per barrel, the biggest intra-day jump since Jan. 14, 1991. The front-month contract was at $66.20 per barrel, up $5.98, or 9.9%, from their previous close, at by 0343 GMT.

U.S. West Texas Intermediate (WTI) futures climbed by as much as 15.5% to $63.34 a barrel, the biggest intra-day percentage gain since June 22, 1998. The front-month contract was at $59.73 a barrel, up $4.88, or 8.9%, at 0343 GMT.

Saudi Arabia is the world’s biggest oil exporter and the attack on the state-owned producer Saudi Aramco’s processing facilities at Abqaiq and Khurais has cut output by 5.7 million barrels per day. The company has not given a timeline for the resumption of full output.

A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days.”

Saudi Arabia’s oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities, an industry source briefed on the developments told Reuters on Sunday.

“How the United States and Saudi Arabia deal with the situation will be closely watched,” said Margaret Yang, market analyst at CMC Markets in Singapore.

“If higher oil prices are here to stay, Asia’s oil reliant economies such as China, Japan, India, South Korea and the Philippines will start to feel the pain as higher energy and raw material prices add on the cost burden,” Yang added.

U.S. President Donald Trump said he approved the release of oil from the U.S. Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined due to the attack.

The attack on plants in the heartland of Saudi Arabia’s oil industry, including the world’s biggest petroleum-processing facility at Abqaiq, came from the direction of Iran, and cruise missiles may have been used, according to a senior U.S. official. Initial reports indicated the attack came from Yemen.

Trump also said the United States was “locked and loaded” for a potential response to the attack on Saudi Arabia’s oil facilities.

Risk premium

ANZ Research said in a note that the market would price in “a sizable global geopolitical risk premium”.

“Any expectation that the market had about the U.S. easing sanctions on Iran following President Trump’s dismissal of John Bolton will quickly dissipate.

This should see Brent crude test the $70 per barrel mark in the short term,” ANZ Research said.

Saudi Arabia is set to become a significant buyer of refined products after the attacks, consultancy Energy Aspects said in a note.

Saudi Aramco will likely buy significant quantities of gasoline, diesel and possibly fuel oil while cutting liquefied petroleum gas exports.

U.S. gasoline futures rose as much 12.9%, while U.S. heating oil futures rose by as much as 10.8%. China’s Shanghai crude oil futures rose to its trading limit, gaining 8% at the open.

Meanwhile, Saudi Aramco has told one Indian refinery there will be no immediate impact on oil supplies as it will deliver crude from other sources and has adequate inventory, a source with the refinery said.

Other Asian buyers such as Thailand have also said the attack would have no immediate impact on oil imports.

Oil declines on global demand worries despite hopes on trade talks

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Reuters
KEY POINTS
  • Brent crude was down 18 cents, or 0.3%, at $60.20 a barrel by 0442 GMT.
  • U.S. West Texas Intermediate (WTI) was off by 14 cents, or 0.3%, at $54.95.
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Oil futures fell on Friday as concerns about global growth and slowing demand lingered despite hints of progress on U.S.-China trade talks, setting up prices for weekly losses after days of swinging back and forth.

Brent crude was down 18 cents, or 0.3%, at $60.20 a barrel by 0442 GMT, while U.S. West Texas Intermediate (WTI) was off by 14 cents, or 0.3%, at $54.95.

Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five. U.S. crude has traded similarly and is heading for its first loss in three weeks.

Gloom over the economic impact of the trade dispute between Washington and Beijing has left investors shrugging off a strong commitment from Organization of the Petroleum Exporting Countries (OPEC) producers to trim output.

“Again it is a battle between the forces of OPEC and those of slowing global growth and thus demand,” said Greg McKenna, strategist at McKenna Macro.

The weak confidence in the markets was reflected by economists in a Reuters poll who predicted the U.S.-China trade spat will worsen or at best stay the same over the coming year.

Nearly 80% of more than 60 economists said U.S.-China trade relations would either worsen or stay the same by the end of next year. The median probability of a U.S. recession in the next two years held at a high of 45%, and the chance of one in the next 12 months held at 30%.

Still, President Donald Trump said on Thursday he would not rule out an interim deal with China on trade, though he prefers a comprehensive agreement.

Asian stocks advanced on Friday on the signs of progress in U.S.-China trade talks, while aggressive stimulus from the European Central Bank also helped counter worries about a global economic slowdown.

In oil markets, however, concern over whether Trump can achieve progress on the trade dispute has overshadowed OPEC’s Thursday agreement to trim output by asking members Iraq and Nigeria to bring their production back in line with targets.

OPEC is striving to prevent a glut amid soaring U.S. production and a slowing global economy.

OPEC+ has over-complied on average with its agreed cut of 1.2 million barrels per day (bpd) as Iranian and Venezuelan exports collapsed due to sanctions.

“With OPEC’s production curbs and ongoing constraints on sanctioned countries, we see the market tightening in Q4 2019. This should help stabilise prices,” ANZ Research said in a note.

“However, trade tensions and reduced risk of tougher sanctions on Iran and Venezuela will limit the upside,” it said.

Those trade tensions are hitting the shipping sector as the flow of goods and commodities slows, the International Energy Agency said on Thursday.

That will lead to weaker growth than previously expected in oil demand from the shipping sector next year despite a shift to cleaner fuel, the agency said.

Oil gains on hopes for US-China trade war thaw

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Reuters
KEY POINTS
  • Brent crude futures rose 45 cents, or 0.7%, to $61.26 a barrel by 0504 GMT.
  • U.S. West Texas Intermediate (WTI) futures gained 50 cents, or 0.9%, to $56.25 a barrel.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
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Oil prices rose on Thursday, recouping some of the heavy losses in the previous session, supported by easing trade tensions between Washington and Beijing and a drop in U.S. crude stockpiles to the lowest in nearly a year.

Brent crude futures rose 45 cents, or 0.7%, to $61.26 a barrel by 0504 GMT, while U.S. West Texas Intermediate (WTI) futures gained 50 cents, or 0.9%, to $56.25 a barrel.

The rise came after China moved to exempt some U.S. anti-cancer drugs and other goods from tariffs, while President Donald Trump announced a delay to scheduled tariff hikes on billions of dollars’ worth of Chinese goods.

The concessions also preceded a planned meeting in coming days aimed at defusing the long-running trade row between the world’s two largest economies.

“The postponement of the next round of China tariffs by President Trump … has the global growth story back in full swing,” said Jeffrey Halley, senior market analyst at OANDA.

That said, “further rallies in Asia look limited today” ahead of the European Central Bank (ECB) rate review.

The ECB meets later on Thursday and is expected to ease policy to support flagging growth.

The price upswing on Thursday came after both of the principal global benchmarks fell sharply in the previous day following a report that President Trump had weighed easing sanctions on Iran, a move that would potentially boost global crude supply at a time of rising concerns about oil demand.

Boosting the market’s good mood, the U.S. Energy Information Administration said on Wednesday that U.S. crude oil stockpiles fell last week to the lowest in nearly a year, as refineries raised output and imports fell.

“Historical inventory patterns suggest that stocks should begin to hit seasonal bottom sometime in the next two-three weeks,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Crude inventories fell for a fourth straight week, decreasing 6.9 million barrels in the week to Sept. 6 – more than double analysts’ expectations of a 2.7 million-barrel draw down.

At 416.1 million barrels, U.S. crude oil inventories were at their lowest since October 2018, and about 2% below the five-year average for this time of year, the EIA said.

Crude stocks at the Cushing, Oklahoma, delivery hub fell 798,000 barrels to 39.3 million barrels, their lowest since November 2018.

Refinery crude runs rose by 114,000 bpd, EIA data showed.

Refinery utilization rates rose by 0.3 percentage point to 95.1% of total capacity.

Oil rises as Saudi Arabia signals OPEC cuts to continue under new energy minister

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Reuters
KEY POINTS
  • Global benchmark Brent was up 53 cents, or 0.9%, at $62.07 a barrel by 0425 GMT.
  • U.S. West Texas Intermediate was 57 cents, or 1%, higher at $57.09 a barrel.
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Oil rose on Monday on expectations that Saudi Arabia, the world’s largest oil exporter, will continue to support output cuts by OPEC and other producers to prop up prices under new Energy Minister Prince Abdulaziz bin Salman.

Prices climbed for a fourth day and were also supported by comments from the United Arab Emirates’ energy minister that OPEC and its allies are committed to balancing the crude market.

Global benchmark Brent was up 53 cents, or 0.9%, at $62.07 a barrel by 0425 GMT, while U.S. West Texas Intermediate was 57 cents, or 1%, higher at $57.09 a barrel.

Salman, a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC), was named to the position on Sunday, replacing Khalid al-Falih. He is the son of Saudi King Salman and this is the first time the energy portfolio has been handed to a member of the royal family.

He helped to negotiate the current agreement between OPEC and non-OPEC countries including Russia, a group known as OPEC+, to cut global crude supply to support prices and balance the market.

A Saudi official said on Sunday that there would be no shift in Saudi and OPEC policy on the cuts and that Prince Abdulaziz would work to strengthen OPEC and non-OPEC cooperation.

“The change at the top doesn’t necessarily mean a shift in policy as much as it’s being viewed as a move to improve relations within OPEC and with non-OPEC producers in the wake of the latest Russian compliance fissures,” said Stephen Innes, Asia Pacific market strategist at Axi Trader.

Russia’s oil output in August exceeded its quota under the OPEC+ agreements.

UAE’s Minister of Energy and Industry Suhail al-Mazrouei said on Sunday that members of OPEC and non-OPEC producers are “committed” to achieving oil market balance.

Asked about possible deeper production cuts, the minister told a news conference in Abu Dhabi that he was not concerned about current oil prices, rather the level of oil inventories.

Trade and geopolitical tensions are affecting the market more than demand and supply, Mazrouei said, but he was quick to rule out hasty steps influenced by the trade war between the United States and China.

“The fear of slower (oil) demand is only going to happen if that tension is escalating and I am personally hopeful that is not the case,” Mazrouei told Reuters on Sunday.

Prices on Monday were also supported by a rise in oil imports in China in August, with shipments to the world’s biggest importer up 3% from July and nearly 10% higher in the first eight months of 2019 from a year earlier.

“With (refinery) maintenance season wrapping up, oil imports stayed buoyant. Attractive profit margins continues to favour higher imports; despite the industry burdened by higher products inventories,” ANZ Research said in a note.

In the U.S., drilling companies cut the number of operating oil rigs for a third week in a row last week.