Crude oil is getting crushed, but one expert sees year-end rally

CNBC

Oil expert sees oil heading higher after a volatile week for crude

Oil expert sees oil heading higher after a volatile week for crude  

Crude oil just posted its worst week since July as a surging dollar, slowing emerging markets and supply concerns have all weighed on the commodity. But despite the price declines, one commodities trader sees a rally in the cards.

Bill Baruch, president of Blue Line Futures, told CNBC’s “Trading Nation” on Thursday what investors can expect next. Here’s what he said.

· A bearish inventory report earlier in the week pushed oil down to its lowest level since June, but crude bulls still have reasons to feel good. For instance, it’s easy to forget crude oil is still trading near multiyear highs, with a gain of 9 percent year to date and 40 percent in the last 12 months.

· One of the biggest stories weighing on crude may be set to dissipate and take some pressure off the commodity: trade tension between the U.S. and China. We may see meaningful headway on trade over the coming weeks, and fears of slowing growth in China may be alleviated.

· My biggest concern, however, is spare capacity. Saudi Arabia promised to ramp up crude production in July, but it actually fell 200,000 barrels per day. Still, the U.S. estimated that production in the lower 48 states has stalled over the last three weeks, and tighter spare capacity can be extremely bullish.

· During this seasonally weak time for crude, investors should look to buy pullbacks; the technical picture should support this strategy. There is tremendous support from $62.50 to $64.50 per barrel, and oil should be positioned to rally back up to between $70 and $80 per barrel later this year. The key level to the downside would be $62.

Bottom line: Despite a 3 percent decline in crude oil this week, Baruch sees the commodity surging into year-end.

US crude rises $1, settling at $70.46, but posts 3rd straight weekly loss

CNBC

  • Crude futures rose on Friday as the dollar slumped after President Donald Trump said Europe, China and others are manipulating their currencies.
  • Still, oil prices were set for a weekly drop on concerns about oversupply and the ongoing trade conflict between the United States and China.
  • Markets edged up in the previous session and early Friday in the wake of Saudi Arabia moving to allay some fears of oversupply.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices rose on Friday as a weakening dollar and lower expected August oil exports from Saudi Arabia supported the market, overtaking concerns about U.S.-China trade tensions and supply increases.

Despite Friday’s gains, crude futures posted a third consecutive weekly decline as supply increases pulled prices lower during the course of the week.

The expiring U.S. West Texas Intermediate (WTI) crude contract for August delivery ended Friday’s session up $1, or 1.4 percent, to $70.46 a barrel, while the more heavily traded September contract was trading 10 cents higher at $68.34 just before the settle.

Brent oil was 47 cents higher at $73.05 a barrel by 2:27 p.m. ET.

Crude futures got a boost as the U.S. dollar slumped on comments from President Donald Trump that China and Europe are manipulating their currency and the Federal Reserve is hurting economic growth by raising interest rates.

Trump: I don't necessarily agree with raising rates

Trump: I don’t necessarily agree with raising rates  

A weaker greenback typically supports oil prices because it makes crude, which is sold in dollars, more affordable to holders of other currencies.

“The dollar was a one-way ticket for the last couple of weeks and basically reversed directions, giving us some strong support,” Flynn said.

Prices are also finding some support after OPEC’s largest oil producer, Saudi Arabia, said it would temper its exports next month.

There was also bullish news from American oilfields, where U.S. energy companies this week cut oil rigs by the most since March. Drillers cut 5 oil rigs in the week to July 20, bringing the total count down to 858, General Electric‘s Baker Hughes energy services firm said in its closely followed report on Friday.

However, trade tensions continued to weigh on the market, providing a ceiling for any gains, traders said. Trump said in a CNBC interview he was ready to put tariffs on all $500 billion of imported goods from China.

Lower oil demand in the United States and China caused by an economic slowdown from their trade dispute would likely weigh heavily on markets.

Trump weighs in on the trade war with China

Trump weighs in on the trade war with China  

“The impact on world economic growth of a levy of this magnitude will be severe and will likely have a strong negative impact on markets,” said Olaf van den Heuvel, chief investment officer at Aegon Asset Management.

The People’s Bank of China on Friday reduced its midpoint for the yuan for the seventh straight trading day to the lowest in a year.

The yuan then retreated to a near 13-month low, although it rebounded later.

Signs of Russia and Saudi Arabia increasing oil production, as well as last week’s surprise build in U.S. crude stockpiles, have also weighed on prices, said Tariq Zahir, analyst at Tyche Capital Advisors.

“You’re having supply come back on to the markets, so it’s not surprising to see a little bit of weakness,” Zahir said.

A group of Norwegian drilling rigs workers agreed on Thursday to end a strike that began on July 10, removing a threat to oil and gas production in the region.

“[A]cting as a further brake on upside potential was the conclusion of an oil workers’ strike in Norway,” analyst at London brokerage PVM Oil Associates Stephen Brennock said.

— CNBC’s Tom DiChristopher contributed to this report

Oil prices steady, set for weekly drop on oversupply and trade tension worries

CNBC

  • Oil prices were set for a weekly drop on concerns about oversupply and the ongoing trade conflict between the United States and China.
  • China-U.S. tensions could slow global economic growth and drag on oil demand.
  • Markets edged up in the previous session and early Friday in the wake of Saudi Arabia moving to allay some fears of oversupply.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Crude prices steadied on Friday and were set for a weekly drop on concerns about oversupply and the ongoing trade conflict between the United States and China, the world’s two biggest oil users.

Brent oil was 9 cents higher at $72.67 a barrel by 8:16 a.m. ET (1216 GMT).

U.S. West Texas Intermediate (WTI) crude for August delivery rose 41 cents to $69.87 a barrel. WTI for September delivery, which becomes the front-month contract on Monday, was down 6 cents at $68.18.

Both benchmarks are on track for their third weekly loss, after big declines on Monday, with Brent set to decline 3.5 percent and WTI to fall by 1.6 percent.

Prices have been dragged down by worries about oversupply as some production returned after outages, while trade tensions between the United States and China stoked fears of damage to their economies and their demand for commodities.

Crude oil prices under pressure as supplies increase

Crude oil prices under pressure as supplies increase  

U.S. President Donald Trump said in a CNBC interview he was ready to put tariffs on $500 billion of imported goods from China.

Lower oil demand in the United States and China caused by an economic slowdown from their trade dispute would likely weigh heavily on markets.

The People’s Bank of China (PBOC) on Friday reduced its mid-point for the yuan for the seventh straight trading day to the lowest in a year.

The yuan then retreated to a near 13-month low though it rebounded later in the day.

U.S. President Donald Trump said in an interview on CNBC television that he was concerned that the Chinese currency was “dropping like a rock” and the strong U.S. dollar “puts us at a disadvantage.”

“Risk sentiment is wobbling, which I believe is attributed to PBOC pushing the RMB complex lower via the fix,” said Stephen Innes, head of trading APAC at OANDA brokerage.

“Markets are now nervous, not only about a trade war, but also a currency war.”

North America has 'a tremendous competitive advantage in energy,' Enbridge CEO says

North America has ‘a tremendous competitive advantage in energy,’ Enbridge CEO says  

The United States accounted for about a fifth of global oil demand in 2017, while China consumed around 13 percent, according to the BP Statistical Review of Energy.

A group of Norwegian drilling rigs workers agreed on Thursday to end a strike that began on July 10, removing a threat to oil and gas production in the region.

“[A]cting as a further brake on upside potential was the conclusion of an oil workers’ strike in Norway,” analyst at London brokerage PVM Oil Associates Stephen Brennock said.

But prices found some support after OPEC’s largest oil producer said it would temper its exports next month.

Saudi Arabia expects its exports to drop by roughly 100,000 barrels per day in August to ensure it does not push more oil into the market than customers need, the kingdom’s OPEC Governor Adeeb Al-Aama said.

“Despite the international oil markets being well balanced in the third quarter, there will still be substantial stock draws due to robust demand and seasonality factors in the second half,” Al-Aama said in a statement.

He also said concerns that Saudi Arabia and its partners are moving to substantially over-supply the market are “without basis”.

US likely to slap tough oil sanctions on Venezuela — and that’s a ‘game changer’ for Maduro

CNBC

  • Venezuelan President Nicolas Maduro won re-election to another six-year term on Sunday, despite widespread anger over the South American country’s crushing economic and social crises.
  • “The next step is sanctions against the oil sector,” Diego Moya-Ocampos, principal political analyst for Latin America at IHS Markit, told CNBC’s “Squawk Box Europe” on Monday.
  • Maduro’s leftist administration is almost entirely dependent on crude sales in order to try to decelerate its spiraling crises.

Nicolas Maduro re-elected president for fresh 6-year term  

The U.S. is almost certainly preparing to impose targeted crude sanctions against Venezuela, analysts told CNBC on Monday, in a move likely to constitute a “devastating” blow for the oil-dependent state.

Venezuelan President Nicolas Maduro won re-election to another six-year term on Sunday, despite widespread anger over the South American country’s crushing economic and social crises. The vote was marred by low voter turnout, allegations of vote-rigging and an opposition boycott.

“The next step is sanctions against the oil sector,” Diego Moya-Ocampos, principal political analyst for Latin America at IHS Markit, told CNBC’s “Squawk Box Europe” on Monday.

“This is crucial because (Venezuela’s) oil sector represents 25 percent of GDP (gross domestic product), 50 percent of fiscal revenues and 97 percent of revenue from foreign exchange… So, obviously, sanctions on the oil sector in Venezuela will be a game changer.”

Oil sanctions would be ‘devastating’

Amid widespread food shortages, the collapse of the country’s traditional currency and relentless hyperinflation, Maduro was widely expected to emerge victorious on Sunday. The socialist leader is now set to serve as Venezuela’s premier until at least 2024.

Officials from the United Nations, the U.S., the European Union and Venezuela’s regional neighbors have all denounced the presidential election as a sham.

Venezuelan President and presidential candidate Nicolas Maduro attends the closing rally of his campaign ahead of the weekend's presidential election, in Caracas, on May 17, 2018.

JUAN BARRETO | AFP | Getty Images
Venezuelan President and presidential candidate Nicolas Maduro attends the closing rally of his campaign ahead of the weekend’s presidential election, in Caracas, on May 17, 2018.

Meanwhile, in the aftermath of Maduro’s disputed success, all eyes have turned to see whether President Donald Trump‘s administration will impose sanctions on the country’s all-important oil sector — as it has repeatedly threatened to do.

Alongside the EU, surrounding Latin American countries have also warned Caracas they would be prepared to take additional measures against Maduro’s government if it went ahead with the election.

“Oil sanctions would be devastating to the Venezuelan economy and to the regime’s internal stability as they would very strongly impact the revenues that flow through the patronage regime,” Fernando Freijedo, Latin America analyst at the Economist Intelligence Unit, told CNBC via email.

‘Epic story of economic mismanagement’

Maduro’s leftist administration is almost entirely dependent on crude sales in order to try to decelerate its spiraling crises.

Yet, the country’s production collapse has seen its crude output drop to around 1.4 million barrels a day (bpd) in recent months — a spectacular fall of nearly 40 percent since 2015.

“The sharp decline in oil prices has nothing to do with the dire state of the economy… (Instead) it is an epic story of economic mismanagement and indeed widespread corruption,” IHS Markit’s Moya-Ocampos said.

Protesters seen marching toward the OEA while holding the Venezuelan flag at the demonstration.

Roman Camacho | SOPA Images | LightRocket via Getty Images
Protesters seen marching toward the OEA while holding the Venezuelan flag at the demonstration.

The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. Brent crude futures have since rebounded to multi-year highs of nearly $80 a barrel, amid a tightening energy market and ongoing OPEC-led production cuts.

U.S. opposes the planned Nord Stream

U.S.’s Tillerson says Nord Stream 2 pipeline would undermine Europe’s energy security

WARSAW (Reuters) – The United States opposes the planned Nord Stream 2 natural gas pipeline that would connect Russia and Germany, believing it would undermine Europe’s energy security, U.S. Secretary of State Rex Tillerson said on Saturday.

U.S. Secretary of State Rex Tillerson speaks at the Warsaw Ghetto monument in Warsaw, Poland January 27, 2018. 

“Like Poland, the United States opposes the Nord Stream 2 pipeline. We see it as undermining Europe’s overall energy security and stability,” he said at a press conference in Warsaw.