Oil prices drop amid demand worries, but US-Iran tensions support

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Reuters

KEY POINTS
  • Benchmark Brent crude futures were down 57 cents, or 0.9%, at $64.29 a barrel by 0342 GMT. They dropped 0.5% on Monday.
  • U.S. crude futures were down 58 cents, or 1%, at $57.32 a barrel. The U.S. benchmark rose 0.8% in the previous session.
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Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil fell on Tuesday amid concerns over the outlook for crude demand, but prices were supported after Washington announced new sanctions on Iran amid mounting tensions in the Middle East.

Benchmark Brent crude futures were down 57 cents, or 0.9%, at $64.29 a barrel by 0342 GMT. They dropped 0.5% on Monday.

U.S. crude futures were down 58 cents, or 1%, at $57.32 a barrel. The U.S. benchmark rose 0.8% in the previous session.

Brent climbed 5% last week and U.S. crude surged 10% after Iran shot down a U.S. drone on Thursday in the Gulf, adding to tensions stoked by attacks on oil tankers in the area in May and June. Washington has blamed the tanker attacks on Iran, which denies having any role.

U.S. President Donald Trump targeted Iranian Supreme Leader Ayatollah Ali Khamenei and other top Iranian officials with sanctions on Monday, taking an unprecedented step to increase pressure on Iran after Tehran’s downing of the drone.

“This would appear to effectively rule out any talks or negotiations to end the crisis,” said Tom O’Sullivan, founder of energy and security consultancy Mathyos Advisory.

Trump also said on Twitter that other countries should protect their own oil shipping in the Middle East rather than have the United States protect them.

Some said the threat of immediate military conflict had eased slightly.

“Traders have lessened their odds for an immediate U.S.-Iran escalation in this forever smouldering hot spot,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Meanwhile, hopes are waning for progress in Sino-U.S. trade talks at this week’s G20 meeting as investors await a meeting between Trump and Chinese President Xi Jinping. That could further hurt global growth prospects, hitting demand for oil and other commodities.

Weak manufacturing data released on Monday by the Federal Reserve Bank of Dallas added to worries about slipping demand for crude oil.

However, supply is expected to remain relatively tight, as the Organization of the Petroleum Exporting Countries and its allies including Russia, an alliance known as OPEC+, appear likely to extend a deal on curbing output when they meet on July 1-2 in Vienna, analysts said.

Russian Energy Minister Alexander Novak said on Monday that international cooperation on crude production had helped stabilize oil markets and was more important than ever. He also voiced concerns about demand.

Sanctions on Iran and Venezuela imposed by Washington have cut oil exports from the two OPEC members but U.S. production has been rising, leading some Russian officials to accuse Washington of carving out market share for its energy exports.

Oil prices slide as trade wars roil financial markets

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Reuters

KEY POINTS
  • Front-month Brent crude futures were at $61.16 at 0109 GMT. That was 83 cents, or 1.3%, below Friday’s close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $52.88 per barrel, down 62 cents, or 1.2% from its last settlement.
Reusable: Oil pump 150921
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Oil prices fell more than 1% on Monday, extending losses of over 3% from Friday, when crude markets racked up their biggest monthly losses in six months amid stalling demand and as trade wars fanned fears of a global economic slowdown.

Front-month Brent crude futures were at $61.16 at 0109 GMT. That was 83 cents, or 1.3%, below Friday’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.88 per barrel, down 62 cents, or 1.2% from its last settlement.

The drops followed price slumps of more than 3% on Friday, which made May the worst-performing month for crude futures since last November.

“Oil prices slid on fresh trade worries after U.S. President Donald Trumpstoked global trade tensions by threatening tariffs on Mexico, which is one of the largest U.S. trade partners and a major supplier of crude oil, ” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities, in a note on Monday.

Edward Moya, senior market analyst at futures brokerage OANDA in New York, said last month’s crude oil price fall of more than 10% was “the worst May performance in seven years as the escalation of the global trade war saw the global growth outlook crumble.”

Moya warned “geopolitical risks remain in place” and added that “oil remains vulnerable” because of a weakening demand outlook for crude.

“The U.S.-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the U.S. and Mexico raised the slower demand picture for the Americas, ” he said.

Barclays bank said in a note published last Friday that U.S. March oil consumption “declined significantly year-on-year for the first time since September 2017 …(as) petroleum demand fell almost 370,000 barrels per day (bpd) year-on-year on weak consumption across the barrel.”

Rising US supply

U.S. bank Goldman Sachs said in a note published on Sunday that “escalating trade wars and weaker activity indicators have finally caught up with oil market sentiment”.

Brent crude oil prices have dropped almost 20% from their 2018-peak in late April.

“The magnitude and velocity of the move lower were further exacerbated by growing concerns over strong U.S. production growth and rising inventories,” Goldman said.

U.S. energy firms this week increased the number of oil rigs operating for the first time in four weeks, and weekly production last stood at a record 12.3 million barrels per day (bpd).

That’s pushed up commercial U.S. crude oil inventories, which have increased by 8.4% since the start of the year to 476.5 million barrels.

“With an increasingly uncertain macro outlook as well as rising U.S. production and large available core-OPEC spare capacity helping offset declining supply from Iran and Venezuela, we instead expect prices will likely remain around our 3Q forecasts and current levels, albeit with still high price volatility, ” Goldman said.

The bank’s Brent price forecast for the third quarter of this year was $65.50 per barrel.

Oil mixed as OPEC cuts, U.S. sanctions prop up prices while trade war weighs

SINGAPORE (Reuters) – Oil prices were mixed on Tuesday as supply cuts, led by producer club OPEC, and U.S. sanctions on fuel exports from Iran and Venezuela supported crude, while concerns about an economic slowdown weighed on the market.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.99 at 0637 GMT, down 12 cents, or 0.2%, from the last session’s close, when they rose 2.1%.

U.S. West Texas Intermediate (WTI) crude futures were at $59.03 per barrel, up 40 cents, or 0.7%, from their last close on Friday. WTI did not trade on Monday due to a U.S. public holiday.

Prices have been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) since the start of the year, and by political tensions in the Middle East.

OPEC and some allies including Russia are due to meet on June 25 and 26 to discuss output policy.

Beyond the output cuts, U.S. bank, Citi said, “Geopolitical turmoil across the Middle East … are likely to encourage financial investors to realign with their bullish physical counterparties.”

In physical oil markets, Middle East crude premiums hit their highest levels in years earlier this month amid falling supply.

Beyond the OPEC cuts, U.S. sanctions on petroleum exports from Iran and Venezuela have tightened markets.

“Iran exports remain under pressure as U.S. sanctions bite. This comes as OPEC appears to be heading towards extending the current production cut agreement,” Citi added.

Trump last year withdrew the United States from a 2015 international nuclear deal with Iran, and Washington is ratcheting up sanctions seeking to end Tehran’s international sales of crude oil and strangle its economy.

Washington has also imposed sanctions on Venezuela’s oil exports, in a bid to topple the government under President Nicolas Maduro there.

Despite this, markets remain cautious amid an economic slowdown as a result of the ongoing trade war between the United States and China, which is also expected to dent fuel consumption.

“We really need to see some strong demand figures, which so far this year has not happened, before we can really start listening to the bulls,” said Matt Stanley, a broker at Starfuels in Dubai.

Reporting by Henning Gloystein; Editing by Richard Pullin and Joseph Radford

Oil falls as trade row fears outweigh drop in US crude stocks

CNBC

  • Brent crude oil futures were at $69.72 a barrel by 0251 GMT, down 65 cents, or 0.9%, from their previous settlement. They earlier fell more than 1%.
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.52 per barrel, down 60 cents, or 1%, having also fallen more than 1% earlier.
Oil operations in the Permian Basin near Midland, Texas

Nick Oxford | Reuters
Oil operations in the Permian Basin near Midland, Texas

Oil prices dropped 1% on Thursday amid concerns over the escalating trade battle between the United States and China, despite a surprise fall in U.S. crude stockpiles.

Brent crude oil futures were at $69.72 a barrel by 0251 GMT, down 65 cents, or 0.9%, from their previous settlement. They earlier fell more than 1%.

U.S. West Texas Intermediate (WTI) crude futures were at $61.52 per barrel, down 60 cents, or 1%, having also fallen more than 1% earlier.

“The inventory numbers from the U.S. only gave oil a transitory boost. It is going to be all about whether the trade talks today can stop Friday’s tariff-geddon,” said Jeffrey Halley, senior market analyst at OANDA in Singapore.

The Sino-U.S. trade war has weighed on oil prices this week as heightened tensions between the world’s two biggest economies cloud the global economic outlook.

U.S. President Donald Trump said on Wednesday that China “broke the deal” in trade talks with Washington and would face stiff tariffs if no agreement is reached.

Higher tariffs are set to take effect on Friday, during Chinese Vice Premier Liu He’s two-day visit to Washington from Thursday.

“Enough progress made to make Mr Trump roll back his threats could see oil make back all of its recent loses in double quick time,” said Halley. “A poor outcome will see the rot move deeper and oil’s recent fall continuing,” he added.

Oil prices have had some support from signs of tighter global supply on the back of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.

Both the Brent and WTI benchmarks have risen more than 30% so far this year.

Global supply has also been tightened by U.S. sanctions on OPEC members Venezuela and Iran.

“From a fundamental point of view, OPEC supply discipline is still in check, and U.S. supplies show tighter markets than expected while Asia demand is still robust,” said Stephen Innes head of trading at SPI Asset Management.

“All of which suggests once the trade war-induced sell-offs abate conditions could settle themselves quickly,” Innes said.

In a sign that Asia demand remains firm, China’s crude imports in April hit a record for the month, at 10.6 million barrels per day (bpd), customs data showed on Wednesday. China is the world’s biggest oil importer.

An unexpected drop in U.S. crude inventories kept oil price declines in check. U.S. crude inventories fell by 4 million barrels in the week to May 3, the Energy Information Administration said on Wednesday.

Oil prices firm amid US sanctions on crude exporters Iran, Venezuela

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.56 per barrel at 0057 GMT on Wednesday, 17 cents, or 0.3 percent, above their last settlement.
  • Brent crude oil futures were at $69.94 per barrel, 6 cents, or 0.1 percent, above their last close.
RT: Oil operations Permian Basin near Midland, Texas 180823
A worker walks through an oil production facility owned by Parsley Energy in the Permian Basin near Midland, Texas, August 23, 2018.
Nick Oxford | Reuters

Oil prices stabilized on Wednesday as markets remained relatively tight amid U.S. sanctions on crude exporters Iran and Venezuela.

U.S. West Texas Intermediate (WTI) crude futures were at $61.56 per barrel at 0057 GMT on Wednesday, 17 cents, or 0.3 percent, above their last settlement.

Brent crude oil futures were at $69.94 per barrel, 6 cents, or 0.1 percent, above their last close.

With U.S. sanctions on Iran and Venezuela in place, analysts said global oil markets remained tight.

“The tight and price-supportive fundamental outlook has not gone away,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

The United States re-imposed sanctions on Iran in November last year, demanding all countries stop importing oil from the country.

Iran has said it will defy the sanctions and continue to export oil.

Most analysts expect its crude export to fall to little more than 500,000 barrels per day, down from around 1 million bpd in April, as governments largely bow to American pressure.

Washington has also slapped sanctions on Venezuelan oil exports, further disrupting crude supply.

Wednesday’s firmer prices partly reversed bigger price falls earlier in the week, which were triggered by announcements from Washington that the United States would this Friday further hike import tariffs on Chinese goods.

“Intensifying trade tensions are raising question on … oil demand prospects,” ANZ bank said on Wednesday.