Oil rises as drop in US inventories eases recession worries

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Reuters
KEY POINTS
  • Brent crude was up by 37 cents, or 0.6%, at $59.88 a barrel by 0220 GMT.
  • West Texas intermediate crude was up 55 cents, or 1.0%, at $55.48 a barrel.
  • U.S. crude stockpiles fell sharply last week as imports dropped, plummeting by 11.1 million barrels, compared with expectations for a 2 million barrel draw, data from industry group, the American Petroleum Institute (API), showed.
Reusable: Texas oil production fracking worker cleans off truck 150204
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil prices rose on Wednesday, with U.S. crude gaining 1% after an inventory report showed U.S. stockpiles fell more than expected, helping ease worries about economic growth due to the Sino-U.S. trade war.

Brent crude was up by 37 cents, or 0.6%, at $59.88 a barrel by 0220 GMT. West Texas intermediate crude was up 55 cents, or 1.0%, at $55.48 a barrel.

U.S. crude stockpiles fell sharply last week as imports dropped, plummeting by 11.1 million barrels, compared with expectations for a 2 million barrel draw, data from industry group, the American Petroleum Institute (API), showed.

The U.S. government’s weekly report is due to be released Wednesday morning and if official numbers confirm the API data then it will be the biggest weekly decline in nine weeks.

“The mammoth crude inventory draw has, at least for the time being, put to rest those U.S. recessionary doom and gloom fears that have been hanging over oil markets like a dark cloud,” said Stephen Innes, managing partner at Valour Markets.

Still, concerns about global growth amid the raging trade war between the United States and China are likely to cap gains.

U.S. President Donald Trump said on Monday that he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.

On Tuesday, however, concerns about trade resurfaced after China’s foreign ministry that it had not heard of any recent telephone call between the United States and China on trade, and said it hopes Washington can stop its wrong actions and create conditions for talks.

Crude oil prices have fallen about 20% from 2019 highs reached in April, partly because of worries that the U.S.-China trade war is hurting the global economy, which could dent demand for oil.

“Global recession risks are higher than at any stage since the (global financial crisis) and the U.S. is not immune,” Morgan Stanley said.

China’s Commerce Ministry last week said it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.

In retaliation, Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.

Oil gains a fifth day after US stockpile drop amid rate optimism

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Reuters
KEY POINTS
  • Brent crude was up 44 cents, or 0.7%, at $65.16 a barrel by 0324 GMT.
  • U.S. West Texas Intermediate crude gained 41 cents, or 0.7%, to $58.46 a barrel.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices rose for a fifth day on Wednesday, buoyed by a bigger-than-expected drop in U.S. inventories and as investors awaited a widely expected cut in interest rates by the Federal Reserve, the first in more than 10 years.

Brent crude was up 44 cents, or 0.7%, at $65.16 a barrel by 0324 GMT.

U.S. West Texas Intermediate crude gained 41 cents, or 0.7%, to $58.46 a barrel.

“The market is quite optimistic leading into what the Fed is going to do on interest rates and as a result of that we’ll see more demand,” Jonathan Barratt, chief investment officer at Probis Group in Sydney, said by phone, referring to the widely expected cut.

Central bankers in the United States began their two-day meeting on Tuesday and were expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.

U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that cemented expectations of Fed rate cuts.

U.S. President Donald Trump on Tuesday reiterated his call for the Fed to make a large interest rate cut. That would be an unlikely move by the central bankers, Barratt said.

Despite the gains in prices, Brent is set to ease in July due to ongoing worries about demand, heading for a decline of about 2%, while WTI is down 1 cent.

Still, U.S. inventories have been falling in recent weeks suggesting demand concerns are overstated.

Crude stockpiles fell again last week, along with gasoline and distillate inventories, data from industry group the American Petroleum Institute (API) showed on Tuesday.

“There is a definitive seasonal trend emerging as inventory draws continue to beat analysts’ expectations by a mile suggesting analysts have grossly underestimated consumption and the breadth of seasonal demand this year,” VM Markets Pte said in a note.

Crude inventories fell by 6 million barrels in the week ended July 26 to 443 million barrels, compared with analysts’ expectations in a Reuters poll for a decrease of 2.6 million barrels, the API data showed.

If confirmed by U.S. government data on Wednesday morning, the decline would put crude stocks down for a seventh week in a row. That would be longest stretch since they fell for a record 10 consecutive weeks ending in January 2018.

Total crude stockpiles, however, would still be about 3% higher than the five-year average.

Oil jumps, Brent up more than 2% after US Navy downs Iranian drone

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Reuters
KEY POINTS
  • Brent crude futures were up $1.28 cents, or 2.1%, at $63.21 by 0329 GMT. They had dropped 2.7% on Thursday, falling for a fourth day that leaves them still set for a weekly drop of more than 5%.
  • West Texas Intermediate crude futures firmed 97 cents, or 1.8%, at $56.27. They ended 2.6% lower in the previous session, and are heading for a weekly decline of more than 6%.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices climbed around 2% on Friday after the U.S. Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows, again raising tensions in the Middle East.

Brent crude futures were up $1.28 cents, or 2.1%, at $63.21 by 0329 GMT. They had dropped 2.7% on Thursday, falling for a fourth day that leaves them still set for a weekly drop of more than 5%.

West Texas Intermediate crude futures firmed 97 cents, or 1.8%, at $56.27. They ended 2.6% lower in the previous session, and are heading for a weekly decline of more than 6%.

Indications that the U.S. Federal Reserve will cut rates aggressively to support the economy were also behind Friday’s gains, said Stephen Innes, managing partner at Vanguard Markets.

“The Fed backstop and the report of the U.S. Navy shooting down an Iranian drone are providing a modicum of support for oil markets amidst a very bearish landscape,” he said.

The United States said on Thursday that a U.S. Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

The move comes after Britain pledged to defend its shipping interests in the region, while U.S. Central Command chief General Kenneth McKenzie said the United States would work “aggressively” to enable free passage after recent attacks on oil tankers in the Gulf.

Still, the longer-term outlook for oil has grown increasingly bearish.

The International Energy Agency (IEA) is reducing its 2019 oil demand forecast due to a slowing global economy amid a U.S.-China trade spat, its executive director said on Thursday.

The IEA is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Fatih Birol said.

“China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies … if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come,” Birol told Reuters in an interview.

Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd but had already cut the growth forecast to 1.2 million bpd in June this year.

Speculators have exited options positions that could have provided exposure to higher prices in the next several years, market participants said on Thursday.

U.S. offshore oil and gas production has continued to return to service since Hurricane Barry passed through the Gulf of Mexico last week, triggering platform evacuations and output cuts.

Royal Dutch Shell, a top Gulf producer, said Wednesday it had resumed about 80% of its average daily production in the region.

Brent approaches $70 as oil prices rise for fourth day

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Reuters

KEY POINTS
  • Brent futures rose 35 cents, or 0.5 percent, to $69.72 a barrel by 0207 GMT, after earlier reaching $69.87, the highest since Nov. 12 and within touching distance of $70.
  • U.S. West Texas Intermediate crude rose 22 cents, or 0.4 percent, to $62.80 cents a barrel, earlier rising to $62.90, the highest since Nov. 7.
RT: Oil tankers Qi Lin Zuo of China and Sti-Matador
Oil tankers Qi Lin Zuo of China and Sti-Matador.
Lucas Jackson | Reuters

Oil prices rose for a fourth day on Wednesday, with support from OPEC-led supply cuts and U.S. sanctions overshadowing an industry report showing an unexpected rise in U.S. inventories last week.

Brent futures rose 35 cents, or 0.5 percent, to $69.72 a barrel by 0207 GMT, after earlier reaching $69.87, the highest since Nov. 12 and within touching distance of $70.

U.S. West Texas Intermediate crude rose 22 cents, or 0.4 percent, to $62.80 cents a barrel, earlier rising to $62.90, the highest since Nov. 7.

“The production cuts by OPEC plus are providing a nice backdrop here for higher prices and until we see U.S. production reassert itself, the easier move is higher for oil,” said Edward Moya, senior market analyst at OANDA.

Supply from the Organization of the Petroleum Exporting countries hit a four-year low in March, a Reuters survey found earlier this week.

Oil production from Russia, which has joined OPEC in agreeing to supply cuts to prop up prices, fell to 11.3 million barrels per day (bpd) last month, but missed the country’s target under the deal.

Three of eight countries granted waivers by Washington to import oil from Iran have cut the imports to zero, a U.S. official said on Tuesday, adding that improved global oil market conditions would help reduce Iranian crude exports further.

Vice President Mike Pence said on Tuesday the United States would continue to pressure Venezuela’s oil industry and those who support it with economic sanctions, citing world oil prices as low enough to allow for the measures.

Venezuela’s state-run energy company, PDVSA, kept oil exports near 1 million barrels per day in March despite U.S. sanctions and power outages that crippled its main export terminal, according to PDVSA documents and Refinitiv Eikon data, Reuters reported later in the day.

U.S. crude stocks rose unexpectedly last week, while gasoline and distillate inventories drew, industry group the American Petroleum Institute said late on Tuesday.

Official numbers from the U.S. Department of Energy (DoE) are due out later on Wednesday.

“As long as we don’t see a major build with the DoE crude oil inventories, we could see a clean move higher,” Moya said.

Oil logs strongest weekly performance in over 8 months

MarketWatch

Monthly IEA report, Syria tensions lift oil

Reuters

By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Crude-oil prices rose for a fifth straight session Friday, with U.S. benchmark crude tallying a gain of nearly 9% for the week, driven by fears of a U.S.-led military conflict in Syria.

A report from the International Energy Agency on Friday also indicated that OPEC soon will have succeeded in reaching its target for reducing the global supply glut.

May West Texas Intermediate crude CLK8, +0.48%  tacked on 32 cents, or 0.5%, to settle at $67.39 a barrel on the New York Mercantile Exchange. For the week, the U.S. oil benchmark rallied by roughly 8.6%, which was the strongest weekly percentage performance since late July of last year.

June Brent LCOM8, +0.83% added 56 cents, or 0.8%, to $72.58 a barrel on ICE Futures Europe. For the week, in the international benchmark was up about 8.2%.

On Friday, the IEA indicated that global oil stockpiles are dwindling and approaching the five-year average the Organization of the Petroleum Exporting Countries is targeting.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its report.

The Vienna agreement refers to the group of OPEC and non-OPEC countries that in 2016 agreed to cut output in an effort to reduce a global supply glut that had dragged oil prices substantially lower. The IEA report echoes the monthly data from OPEC earlier this week, which showed the group’s output declined by 201,000 in March and that the supply surplus is evaporating.

The IEA also noted that the continuing U.S.-China trade spat could dent oil demand.

Longer term, “we are bullish on oil prices as continued global economic growth drives demand higher by approximately 1.5% per year,” said Jay Hatfield, chief executive officer and founder of InfraCap. Global supply also “remains constrained by declines in Venezuela production, flat to declining production in offshore areas such as the North Sea, offset by steady growth in U.S. production of approximately 1 million barrels per day.”

Hatfield expects WTI to trade in the $60-70 range this year and $70-80 in 2019, “with more risk to the upside.”

Read: Here’s why Credit Suisse just boosted its oil price forecast by 18%

In the U.S., Baker Hughes BHGE, +1.37%  on Friday reported that the number of active domestic oil rigs edged up by 7 this week. The figure, which offers a peek at U.S. oil activity, was up a second straight week.

Still, market participants said crude futures have come under pressure amid fears that Russia may retaliate against the U.S. by imposing sanctions in response to sanctions levied against Moscow last week in response to what the U.S. said was attempts to subvert Western democracies, and malicious cyber activities.

“This news offset good news about the ratcheted down of trade tensions with China and the possibility the U.S. could be re-entering the [Trans-Pacific Partnership],” said Phil Flynn, senior market analyst at Price Futures Group, in a note.

The fear is that sanctions from Russia could hurt demand and push prices lower, he explained.

More broadly, the stellar weekly performances for both WTI and Brent this week come as geopolitical tensions have returned to the fore after a suspected chemical-weapons attack in Syria that killed civilians over the weekend. That matter is also complicated by Syria’s friendly ties with Russia, Iran and Turkey.

U.S. President Donald Trump on Wednesday warned Russia that he was ready to launch an imminent military attack on Syria, but toned down his rhetoric on Thursday.

Among energy products, gasoline RBK8, +0.34%  settled 0.5% higher at $2.065 a gallon, for a 5.7% gain on the week. May heating oil HOK8, +0.87% added 0.8% to $2.10 a gallon—up about 7.3% for the week.

May natural gas NGK18, +1.86%  rose 1.8% to $2.735 per million British thermal units, for a weekly rise of 1.3%.