Oil prices rise ahead of OPEC+ meeting on extended output cuts

CNBC

Reuters
KEY POINTS
  • Brent crude futures rose 0.91%, or 35 cents, to $38.67 a barrel as of 0427 GMT.
  • West Texas Intermediate (WTI) crude futures rose 0.56%, or 20 cents, to $35.64 a barrel.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil prices rose on Tuesday, with traders waiting to see whether major producers agree to extend their huge output cuts to shore up prices at a virtual meeting expected later this week.

Brent crude futures rose 0.91%, or 35 cents, to $38.67 a barrel as of 0427 GMT.

West Texas Intermediate (WTI) crude <CLc1> futures rose 0.56%, or 20 cents, to $35.64 a barrel.

Brent has doubled over the past six weeks, thanks to supply cuts by the Organization of the Petroleum Exporting Countries and allies, including Russia, a grouping dubbed OPEC+.

Both Brent and WTI prices, however, are still down about 40% for the year so far.

“The whole story is very much based around the supply cuts and the demand recovery,” said Commonwealth Bank commodities analyst Vivek Dhar.

OPEC+ producers are considering extending their output cut of 9.7 million barrels per day (bpd), about 10% of global production, into July or August, at an online meeting likely to be held on June 4.

“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” said Citi’s head of commodities research Edward Morse.

Under the OPEC+ plan agreed in April, the record supply cut was to be for May and June, scaling back to a cut of 7.7 million bpd from July through December. Saudi Arabia has been leading talks to push for extending the heftier cuts, sources told Reuters last week.

“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” said analysts at Dutch bank ING.

An extension could push oil prices to $40, but there would have to be follow-through on that commitment to sustain higher prices, said Commonwealth Bank’s Dhar.

A drop in crude stockpiles at Cushing, Oklahoma, which fell to 54.3 million barrels in the week to May 29, also buoyed prices, traders said, citing a Genscape report on Monday.

A preliminary Reuters poll, however, showed that overall U.S. crude oil stocks likely increased last week.

Trade tension between China and the United States over Beijing’s security clampdown in Hong Kong, as well as manufacturing data on Monday showing Asian and European factories struggling, has kept a lid on gains.

Oil rises supported by US-China trade optimism, Middle East tensions

CNBC

Reuters
KEY POINTS
  • Global benchmark Brent crude futures, were up 22 cents, or 0.3%, to 66.22 a barrel by 0430 GMT.
  • U.S. West Texas Intermediate (WTI) crude was up 18 cents, or 0.3%, at $61.24 per barrel.
  • Oil markets were closed on Wednesday for New Year’s Day.
Reusable: Iraq Oil Daura oil refinery Bagdad 091105
An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner
Getty Images

Oil prices kicked off the new year higher on Thursday as warming trade relations between the United States and China eased demand concerns, while rising tensions in the Middle East fuelled worries about supply.

Global benchmark Brent crude futures, were up 22 cents, or 0.3%, to 66.22 a barrel by 0430 GMT. U.S. West Texas Intermediate (WTI) crude was up 18 cents, or 0.3%, at $61.24 per barrel.

Oil markets were closed on Wednesday for New Year’s Day.

Both benchmarks ended higher in 2019, posting their biggest annual gains since 2016, buoyed at the end of the year by a thaw in the prolonged trade dispute between the United States and China – the world’s two largest economies – and a deeper output cut pledged by the Organization of Petroleum Exporting Countries (OPEC) and its allies.

“Oil remains supported by the back-burner trade truce and the uptick in political unrest in Iraq,” said Stephen Innes, chief Asia market strategist at AxiTrader.

The U.S. military carried out air strikes against Iran-backed Katib Hezbollah militia group over the weekend. Angry at the air strikes, protesters stormed the U.S. Embassy in Baghdad on Wednesday, although they withdrew after the United States deployed extra troops.

In 2020, Brent is forecast to average $63.07 a barrel, up from December’s estimate of $62.50, while WTI is forecast to average $57.70 a barrel, up from December’s estimate of $57.30, as the OPEC-led supply cuts and the expectations of a U.S.-China trade deal boosted analysts’ views on the prospects for the year, a Reuters poll showed.

U.S. President Donald Trump said on Tuesday the U.S.-China Phase 1 trade deal would be signed on Jan. 15 at the White House.

January also marks the start of the deeper output cuts by OPEC and its partners, including Russia. OPEC and its allies have agreed to cut a further of 500,000 barrels per day (bpd) from Jan. 1, on top of their previous cut of 1.2 million bpd that started on Jan. 1 a year ago.

A fall in U.S. crude inventories last week also supported prices. U.S. crude stocks fell 7.8 million barrels in the week ended Dec. 27, compared with analysts’ expectations for a decrease of 3.2 million barrels, according to data from the American Petroleum Institute (API) released on Tuesday.

Official data from the Energy Information Administration (EIA) is due on Friday as the release has been delayed by two days by the New Year’s holiday.

“Traders will look towards Friday’s EIA report for forward guidance on oil prices,” said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

Oil prices gain as market awaits signals on U.S.-China trade talks

REUTERS

TOKYO (Reuters) – Oil prices rose on Tuesday, reversing early losses on hopes that U.S. President Donald Trump may signal progress on trade talks with China in a speech later in the day.

Brent crude futures were up 31 cents, or 0.5%, at $62.49 a barrel by 0644 GMT, after dipping to as low as $61.90 earlier in the day.

U.S. West Texas Intermediate (WTI) crude was up 23 cents, or 0.4%, at $57.09 a barrel, having fallen to $56.55.

Worries about the impact on oil demand from the fallout of the 16-month U.S.-China trade war, which has weighed on global economic growth, sent prices lower on Monday.

Trump said on Saturday that talks with China were moving along “very nicely” but the United States would only make a deal if it was the right one for Washington. He also there had been incorrect reporting about U.S. willingness to lift tariffs.

Trump speaks to the Economic Club of New York later on Tuesday, and markets will be keen for any update on the talks.

“Positive commentary about a possible U.S. and China interim trade deal certainly helps, but the fundamentals are supportive,” said Virendra Chauhan, Oil Analyst at Energy Aspects in Singapore, pointing to an improved demand outlook.

“Six million barrels per day of refining capacity is due to return from turnarounds across November and December,” he said.

On the supply side, Goldman Sachs also cut its 2020 forecast for growth in U.S. oil production, which has surged in recent years.

The investment bank cut its growth forecast for next year by 100,000 barrels per day (bpd) to 600,000 bpd over 2019.

“We expect U.S. oil growth to decelerate into 2020 as many companies look to balance growth with capex,” Goldman Sachs said.

Elsewhere, U.S. data showed that crude inventories at Cushing, the delivery point for WTI, fell about 1.2 million barrels in the week to Nov. 8, traders said, citing market intelligence firm Genscape.

Cushing inventories had grown for five weeks in a row through Nov. 1, according to government data.

Demand growth may pick up in 2020 after a year of dashed expectations amid the U.S.-China trade war, Fitch Solutions Macro Research analysts said in a new report.

“Our data show that 2019 will mark the nadir of oil demand growth over the next five years,” Fitch Solutions said.

“We forecast demand to (grow) by around 0.5% this year, rising to 0.8% in 2020,” the report said, although it added that “trade and political risks remain extremely elevated.”

Oil falls but prices still elevated after attacks on Saudi facilities

CNBC

Reuters
KEY POINTS
  • Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT.
  • West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.
  • Attacks on Saudi oil facilities heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages.
  • Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.
GP: Aramco oil facility Saudi Arabia 190719
Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019.
Fayez Nureldine | AFP | Getty Images

Oil fell more than 1% on Tuesday as the market hung on tenterhooks over the threat of a military response to attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half and sent prices soaring by the most in decades.

The Saturday attack heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages. Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.

Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT, and West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.

Prices surged nearly 20% in intra-day trading on Monday in response to the attacks, the biggest jump in almost 30 years, before closing around 15% higher.

Equities and other markets were also pressured on Tuesday.

“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

“However, the (geopolitical) risk premium … which has been basically ignored by markets in favour of growth worries in recent months, is likely to be priced in going forward,” she said.

A gauge of oil-market volatility on Monday rose to the highest level since December of last year, and trading activity showed investors expect higher prices in coming months.

Japan said on Tuesday it would consider a coordinated release of oil reserves if necessary.

U.S. President Donald Trump said on Monday it looked like Iran was behind attacks on the Saudi oil facilities but stressed he did not want to go to war.

Tehran has rejected the charges that it was behind the drone strikes.

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

Washington also wants to pressure Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.

“With the U.S. ‘locked and loaded’ awaiting signs from Saudi Arabia that Iran was involved, tensions in the Middle East could get worse before they get better. Under these circumstances, the price of oil could remain elevated for some time yet,” City Index analyst Fiona Cincotta said.

“However, let’s not also forget that the demand picture isn’t great right now, which will dampen the oil price quickly. Most recently China’s industrial production figures disappointed overnight,” Cincotta said.

The attack on state-owned producer Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais cut its output by 5.7 million barrels a day and threw into question its ability to maintain oil exports.

The company has not given a specific timeline for the resumption of full output.

Oil prices firm on hopes for US-China trade deal

CNBC

Reuters

KEY POINTS
  • President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods originally scheduled for later this week thanks to progress in trade talks and said if progress continued, he and Chinese President Xi Jinping would seal a deal.
  • Both the international benchmark Brent and U.S. crude futures contracts saw gains.

Oil prices rose on Monday as Washington and China appeared to edge closer to a trade deal, dampening fears over the outlook for global economic growth.

International Brent crude oil futures were at $67.26 a barrel at 0005 GMT, up 14 cents, or 0.2 percent, from their last close. They ended Friday little changed after touching their highest since Nov. 16 at $67.73 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $57.38 per barrel, up 11 cents, or 0.2 percent, from their last settlement. WTI futures climbed 0.5 percent on Friday, having marked their highest since Nov. 16 at $57.81 a barrel.

“Crude prices continue to be supported on optimism a trade deal will be reached in the coming days by the world’s two largest economies, said Edward Moya, senior market analyst, OANDA.

President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods scheduled for later this week thanks to progress in trade talks and said if progress continued, he and Chinese President Xi Jinping would seal a deal.

Signs of reduced global oil supply also supported crude prices.

U.S. energy firms this week cut the number of oil rigs operating for the first time in three weeks week after U.S. crude production hit an all-time high, boosting exports to a record-peak and stockpiles to their highest in over a year.

Meanwhile, Mexico’s Pemex produced 1.62 million barrels of crude per day in January, less than any month in almost three decades, the state-owned oil company said on Friday, underscoring the challenges facing a government that vows to pump far more in a few years.