Crude retains support

The Oil and Gas Year (TOGY)

LONDON, November 24, 2017 – Crude oil prices remained supported on Friday, amid ongoing optimism over the rebalancing of the market and as the partial closure of the a key North-American pipeline sparked supply disruption concerns.

The U.S. West Texas Intermediate crude January contract was up 71 cents or about 1.22% at $58.73 a barrel by 09:50 a.m. ET (13:50 GMT), its highest since July 2015.

Elsewhere, Brent oil for January delivery on the ICE Futures Exchange in London was steady at $63.55 a barrel.

Trade volumes were expected to remain thin with U.S. markets open for only half a day on Friday after the Thanksgiving holiday on Thursday.

Prices increased following news that an oil spill forced the partial closure of the Keystone pipeline connecting Canadian oilfields with the U.S. on Friday.

The commodity was already supported after the EIA reported on Wednesday that crude oil inventories fell by 1.9 million barrels last week, marking the first decline in three weeks. That was compared with analysts’ expectations for a decline of 1.5 million barrels.

Prices received an additional boost from growing signals that the Organization of Petroleum Exporting Countries (OPEC) and its allies will agree to prolong supply curbs beyond March when producers meet in Vienna next week.

Top crude exporter Saudi Arabia is lobbying oil ministers to agree on a nine-month extension to OPEC-led supply cuts, sources familiar with the matter said, as Riyadh seeks to ensure a price-sapping glut is eradicated.

OPEC, together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and prop up prices.

The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.

Elsewhere, gasoline futures were up 0.08% at $1.779 a gallon, while natural gas futures lost 2.49% to $2.894 per million British thermal units.

Oil steadies as Middle East tensions offset concern over China demand

CNBC

  • China’s October crude imports fall to 1-year low
  • But ongoing OPEC-led supply cuts support crude prices
  • Traders concerned about rising Middle East tension

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil steadied on Wednesday as Chinese crude imports fell to a one-year low, but losses were offset by investor caution over rising political tensions in the Middle East.

Traders said they were closely watching escalating tensions in the Middle East, especially between regional rivals Saudi Arabia and Iran.

Brent futures were at $63.80 a barrel at 1005 GMT, up 11 cents, while U.S. West Texas Intermediate (WTI) futureswere down 8 cents at $57.12 a barrel.

Brent crude hit $64.65 earlier this week, its highest since mid-2015, as political tensions in the Middle East escalated after a sweeping anti-corruption purge in top crude exporter Saudi Arabia, which in turn has confronted Iran over the conflict in Yemen.

China’s October oil imports fell to just 7.3 million barrels per day from a near record-high of about 9 million bpd in September, according to data from the General Administration of Customs on Wednesday. That is the lowest level since October 2016, though imports were up 7.8 percent from a year ago.

Li Yan, oil analyst with Zibo Longzhong Information Group, said the lower imports reflected fewer purchases from independent refineries, “as many of them are running out of crude quotas for this year.”

Here's what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup

Here’s what Dennis Gartman finds ‘fascinating’ about oil’s reaction to the Saudi shakeup  

For next year, however, independent refiners are likely to boost their imports again as authorities on Wednesday raised the 2018 crude oil import quota by 55 percent over 2017 to 2.85 million bpd.

The oil price has gained around 14 percent in the last month alone, propelled largely by evidence that OPEC’s efforts, together with those of its partners to curtail output, is helping erode a global overhang of unused crude.

“Stronger oil fundamentals and investor inflows have been the catalyst for higher oil prices, but adding further support now is a focus on several geopolitical risks that have been looming over oil markets for a while,” said analysts at Citi.

The Organization of the Petroleum Exporting Countries‘ 2017 World Oil Outlook showed the group predicts demand for its crude will rise more slowly than previously expected in the next two years, as higher prices from its supply policy stimulate output growth from rival producers.

“The call on OPEC in 2019 envisaged by OPEC was reduced by 600,000 to a good 33 million bpd, and is expected to remain at roughly this level until 2025,” Commerzbank said in a note.

“Currently, OPEC is only producing somewhat less than this amount. This leaves OPEC virtually no scope to expand production in the next eight years.”

OPEC who? US oil producers are moving into the Asian market

CNBC

  • In a shakeup to the established order, U.S. crude oil exporters are moving more cargoes toward Asia
  • Exports from U.S. “tight oil” extracted from shale formations alone may swell to over 3 million barrels a day by 2022 — with a third of that volume absorbed by Asia, said one economist

Workers aboard a Shell platform in 2013 as it sails away for the Mars B Field in the Gulf of Mexico.

Eddie Seal | Bloomberg | Getty Images
Workers aboard a Shell platform in 2013 as it sails away for the Mars B Field in the Gulf of Mexico.

Mars and Poseidon are coming to Asia.

That is, those two varieties of U.S.-produced crude oil are spearheading American exporters’ direct challenge to OPEC for market share in Asia.

In a shakeup to the established order, U.S. crude oil exporters are moving more cargoes toward high-growth Asia as they capitalize on favorable price differentials and as supply curbs by the Organization of Petroleum Exporting Countries force Gulf producers to withdraw from their traditional demand heartland.

That’s good news for Asian buyers who benefit from a more diversified basket of crude oil on offer and as competition between suppliers drives down prices.

“See it as a bigger buffet table for Asian refiners who have more supply options and sellers to engage with,” said John Driscoll, director of JTD Energy Services in Singapore and a former oil trader whose career spans nearly 40 years.

India received its first American oil cargo of 1.6 million barrels on Oct. 2, the result of Prime Minister Narendra Modi’s visit to the U.S. in June where he negotiated contracts to supply three Indian refineries with nearly 8 million barrels.

‘Markets 101’

All of this change was kicked off when the Obama administration lifted a 40-year-old ban on exporting domestic oil in December 2015.

Now, more U.S. crude is on the way if market economics stay favorable.

One of the decisive factors dictating global oil flows is the price gap between two international benchmarks: Brent crude oil and U.S. counterpart West Texas Intermediate. Typically, the higher Brent’s premium is over WTI, the stronger the pull for lower-priced U.S. crude from outside buyers.

The gap between Brent and WTI hit its widest level in two years in early October at over $6.00 a barrel. That spread “is the one everyone hones in,” said Driscoll, though other differentials are also closely monitored by oil traders for clues generating possible arbitrage leads, as is the gap between U.S. Mars crude oil – increasingly seen as a key export grade – and WTI.

And exporting is an increasingly popular option: U.S. crude exports rose to a record 1.98 million barrels a day in the week ending September 29.

That’s “classic Oil Markets 101,” said Michael Wittner, head of oil research at Societe Generale, “too much crude in the U.S. and too little crude elsewhere means that U.S. prices weaken relative to global prices, and exports increase to address the imbalance.”

OPEC on notice

Exports from U.S. “tight oil” extracted from shale formations alone may swell to over 3 million barrels a day by 2022 — with a third of that volume absorbed by Asia — said Ed Rawle, chief economist at Wood Mackenzie.

That signals a change in the energy world order as OPEC influence wanes. Some energy commentators believe the fracking boom has helped the U.S. take the title of the world’s “swing” producer from Saudi Arabia. The Americans, it’s thought, now possess the capacity to respond to fluctuations in market demand.

As tankers laden with U.S. crude move eastwards, OPEC is sure to take notice.

“Traditional OPEC suppliers will need to watch this space and price their crude competitively as up to 50 percent of incremental crudes into Asia could come from non-OPEC,” Rawle said.

Whether more U.S. crude gets shipped east will hinge on how fast capacity can be added to key U.S. export terminals such as the Louisiana Offshore Oil Port, America’s only deep-water tanker port in the Gulf of Mexico.

“The emergence of the U.S. as a significant exporter to Europe or Asia will only be progressive and contingent on the development of Gulf Coast export capacity and crude price differentials remaining favorable,” said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas. “For now, these exports remain opportunistic.”

Oil prices mixed as US stockpile rise takes shine off OPEC higher demand view

CNBC

REUTERS

Oil prices were mixed on Wednesday, dampened by reports of rising U.S. crude stockpiles but retaining some of the gains made in the previous session after OPEC said it expected higher demand for its crude next year.

U.S. West Texas Intermediate (WTI) was unchanged at $48.23 a barrel at around 0359 GMT after rising earlier in the day. The contract rose 0.3 percent on Tuesday.

International benchmark Brent crude was down 13 cents, or 0.2 percent, at $54.14 a barrel, having settled up 0.8 percent in the previous session.

The difference between Brent and WTI, known as the spread, rose by 11 cents to $5.41 in the favor of the global benchmark, as Hurricanes Harvey and Irma continued to impact demand for both crude and oil products in the U.S.

“The market is still trying to assess…the positioning on Brent and the positioning on WTIE and that’s reflected in the price spread,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

Oil's supply concerns still there post-Irma, but this could be crude's next catalyst

Oil’s supply concerns still there post-Irma, but this could be crude’s next catalyst   

Wednesday’s drop came after a rise the day before when the Organization of Petroleum Exporting Countries (OPEC) forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut that has weighed on prices.

Analysts have warned current U.S. stocks data may not give a full picture in coming weeks because of weather disruption, but industry group the American Petroleum Institute reported late on Tuesday that U.S. crude stockpiles rose nearly twice expected levels last week. Refineries cut output following Hurricane Harvey, while gasoline and distillate inventories fell.

Crude inventories rose by 6.2 million barrels in the week to Sept. 8 to 468.8 million, nearly double analysts’ expectations of an increase of 3.2 million barrels.

The U.S. Department of Energy’s Energy Information Administration (EIA)reports on stockpiles and refinery runs later on Wednesday.

The EIA also said on Tuesday it had revised both its 2017 and 2018 oil production forecast figures lower to reflect, in part, the effects of Hurricane Harvey.

The largest refinery in the United States, in Port Arthur Texas, was running at reduced rates, sources told Reuters.

Oil ends at 4-week high as refineries reopen

New hurricane sparks fears of potential damage to U.S. oil production

Reuters
Hurricane Irma, a record Category 5 storm, is heading toward Florida.
By

SaraSjolin

Markets reporter

Christopher Alessi

The U.S. oil benchmark closed at a four-week high Wednesday, reflecting concerns about a potential hit to production from Hurricane Irma as well as renewed demand for crude as Gulf Coast refineries previously shut down by Hurricane Harvey reopened.

West Texas Intermediate U.S. crude oil for October CLV7, +0.22%  rose 50 cents, or 1%, to close at $49.16 a barrel, the highest settlement since Aug.9. Brent crude LCOX7, +0.59% the global benchmark, gained 82 cents, or 1.5%, to end at $54.20 a barrel, its highest close since April 18.

“Oil market participants have become used to tropical storms causing no lasting damage to the energy infrastructure. This may change now, prompting the market to price in something of an uncertainty premium. Many market participants viewed the latest fall in the WTI price as excessive in any case,” analysts at Commerzbank said in a note.

The upswing in crude prices marked a swift reversal from last week, when prices had languished in the wake of Hurricane Harvey. The storm knocked out more than 20% of U.S. refining capacity, cutting demand for crude and weighing on prices.

Refining capacity has since started to come back online, providing support for crude. That, however, is weighing on gasoline prices that rallied last week as refineries shut down and created a short-term shortage. Gasoline for October delivery RBV7, -0.60%  fell 1.15 cents, or 0.7%, to $1.7595 a gallon.

At the same time, the market is preparing for potential disruptions to oil production in the Gulf of Mexico as the result of Hurricane Irma, which made landfall in the Caribbean earlier on Wednesday, and other brewing storms. If crude output is hindered by the new storms it would boost prices, the analysts said.

The Harvey-related refinery shutdowns are expected to have contributed to a build in crude-oil stocks and a fall in gasoline inventories when the Energy Information Administration provides its weekly update on Thursday morning.

Analysts surveyed by S&P Global Platts produced a consensus forecast for a 2.7 million-barrel rise in crude stocks, while gasoline inventories are expected to fall 4.2 million barrels. The survey found distillate stocks are expected to drop 1.9 million barrels while refinery utilization is expected to show a sharp fall of 7 percentage points.

In addition, inventories at Cushing, Okla., a storage hub that serves as the delivery point for Nymex crude futures, could see significant increases in the next few weeks as a result of Harvey, according to Geoffrey Craig, oil futures editor at S&P Global Platts.

Ahead of the EIA data, the American Petroleum Institute, an industry trade group, will provide its weekly inventory figures late Wednesday.

Oil prices also responded positively to suggestions Tuesday by the Russian energy minister, Alexander Novak, that Russia and Saudi Arabia would be open to extending their output cut agreement.

“The strong cooperation of the leading oil producers in combating the ‘oil glut’ is making market participants hopeful that stocks may be quickly reduced, which is boosting the price rise,” the Commerzbank analysts said.

The Organization of the Petroleum Exporting Countries — of which Saudi Arabia is the largest member — and 10 producers outside the cartel, including Russia, first agreed late last year to cap production at around 1.8 million barrels a day lower than peak Oct. 16 levels, with the aim of reining in the global oil glut and sending prices higher.

The deal, which was extended in May until March 2018, has been undermined by falling compliance, growing U.S. output and an unexpected surge in production from Libya and Nigeria — two member states exempted from the agreement because their oil industries had been damaged by civil unrest.

Analysts said they were looking ahead to official U.S. data this week on crude inventory levels, which have fallen consistently in recent months, while cautioning that the information was likely to be less reliable than usual as a result of Harvey.

In other energy products, October natural gas NGV17, +0.60%  rose 0.9% to end at $3 per million British thermal units. Heating oil futures HOV7, +0.05%  rose 0.7%, to $1.7595 a gallon.

—Sara Sjolin contributed to this article.