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

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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.
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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.

Oil prices under pressure from US-China trade dispute, market remains tense

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Reuters

  • Brent crude oil futures were at $71.09 per barrel at 0341 GMT, 15 cents, or 0.2 percent, below their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $62.20 per barrel, 5 cents below their last settlement.
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Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, October 14, 2016.
Essam Al-Sudani | Reuters

Oil prices were under pressure on Tuesday from concerns the escalating Sino-U.S. trade dispute could slow the global economy, while U.S. sanctions on crude exporters Iran and Venezuela helped keep the market on edge.

Brent crude oil futures were at $71.09 per barrel at 0341 GMT, 15 cents, or 0.2 percent, below their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $62.20 per barrel, 5 cents below their last settlement.

Analysts said there were a number of factors driving oil prices.

One is a concern that global economic growth is threatened by the intensifying trade dispute between the United States and China.

Talks between the world’s two biggest economies hit a wall over the weekend, when U.S. President Donald Trump announced a raft of new import tariffs on Chinese goods.

“U.S.-China trade tensions are set to be at the forefront of the market’s collective mind this week, as any nuance out of discussions in Washington could trigger knee-jerk moves by traders,” said Han Tan, analyst at futures brokerage FXTM.

Tanker brokerage Eastport said in a note that “worsening trade friction between Washington and Beijing poses a downside risk to our forecasts” for petroleum products.

On the supply-side, oil markets remain tense as the United States tightens sanctions on Iranian oil exports, saying on Monday it was boosting its military presence in the Middle East.

Iran has threatened “reciprocal actions” against U.S. sanctions, which could mean restarting some of its nuclear programme.

The U.S. sanctions have already halved Iranian crude oil exports over the past year to below 1 million barrels per day (bpd), and shipments to customers are expected to drop as low as 500,000 bpd in May as sanctions tighten.

Beyond Iran, the crisis in Venezuela has also disrupted oil supplies from this OPEC member, with Washington placing oil sanctions on the Venezuelan government under President Nicolas Maduro.

“As the White House raises the stakes on Iran and Venezuela, what is the oil endgame?” asked Bank of America Merrill Lynch in a note.

“The Venezuelan political situation seems untenable but oil exports could continue to contract until the industry receives a capital injection, a dim prospect for now,” the bank said.

“In addition … Iran oil exports could collapse further over the coming months. While America’s maximum pressure policy on these two regimes may pay off, additional oil supply losses cannot be ruled out,” it added.

Bank of America said it expected Saudi Arabia “to bring back oil production slowly as Iranian barrels exit the market”, adding that overall it saw Brent crude oil prices having a floor at $70 per barrel in current market conditions.

Oil prices hover close to 2019 highs on OPEC output cuts, U.S. sanctions

REUTERS

U.S. sanctions against oil producers Iran and Venezuela are also boosting prices, although traders said the market may be capped by rising U.S. output.

U.S. West Texas Intermediate (WTI) futures were at $59.14 per barrel at 0746 GMT, up 5 cents from their last settlement and close to the 2019 high of $59.23 reached the previous day.

Brent crude oil futures were up 20 cents at $67.74 per barrel, also close to this year’s peak of $68.14 marked late last week.

In China, Shanghai crude futures, launched in March last year, bounced 4.5 percent from their last close to 468.2 yuan ($69.71) per barrel, also near 2019 highs of 475.7 yuan a barrel hit during a brief spike in February.

In dollar-terms, this pushed Shanghai crude into a premium over Brent.

The Organization of the Petroleum Exporting Countries (OPEC) on Monday scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.

OPEC and a group of non-affiliated producers including Russia, known as OPEC+, started withholding supply to halt a sharp price drop in the second-half of 2018, when markets came under pressure from surging output as well as an economic slowdown.

“The OPEC+ deal has brought stability to crude prices and signs of an extension have taken crude higher,” said Alfonso Esparza, senior market analyst at futures brokerage OANDA.

Prices have been further supported by U.S. sanctions against oil exports from Iran and Venezuela, traders said.

Because of the tighter supply outlook for the coming months, the Brent forward curve has gone into backwardation since the start of the year, meaning that prices for immediate delivery are more expensive than those for dispatch further in the future, with May Brent prices currently around $1.20 per barrel more expensive than December delivery Brent.

Outside OPEC, analysts are eyeing U.S. crude oil production, which has soared by more than 2 million barrels per day (bpd) since early 2018, to around 12 million bpd, making the United States the world’s biggest producer ahead of Russia and Saudi Arabia.

Weekly output and storage data will be published by the Energy Information Administration (EIA) on Wednesday.

On the demand-side, there is concern that an economic slowdown will erode oil consumption.

Bank of America Merrill Lynch said in a note that economic “risks are skewed to the downside” and that “we forecast global demand growth of 1.2 million bpd year-on-year in 2019 and 1.15 million bpd during 2020”.

The bank said it expected “Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.”

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

Oil slips on economic slowdown, but OPEC-led cuts still support

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KEY POINTS
  • Brent crude oil futures were at $67.03 per barrel at 0231 GMT, down 13 cents, or 0.2 percent, from their last close, but not far off the $68.14 per barrel 2019-high reached last week.
  • U.S. West Texas Intermediate (WTI) futures were at $58.32 per barrel, down 20 cents, or 0.3 percent, from their last settlement, and also not far off their 2019-high of $58.95 from the previous week.
  • Despite the lower prices, crude markets remain broadly supported by supply cuts led by producer group OPEC and U.S. sanctions against Iran and Venezuela.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil prices dipped on Monday amid concerns that an economic downturn may dent fuel consumption, but crude markets remain broadly supported by supply cuts led by producer group OPEC and U.S. sanctions against Iran and Venezuela.

Brent crude oil futures were at $67.03 per barrel at 0231 GMT, down 13 cents, or 0.2 percent, from their last close, but not far off the $68.14 per barrel 2019-high reached last week.

U.S. West Texas Intermediate (WTI) futures were at $58.32 per barrel, down 20 cents, or 0.3 percent, from their last settlement, and also not far off their 2019-high of $58.95 from the previous week.

“The greatest downside risk to our oil price view is demand weakness on slower economic growth. Our base case is that global oil demand will increase by 1.3 million barrels per day (bpd) in 2019… A synchronized global slowdown in growth could push global demand growth to below 1 million bpd,” Bernstein Energy said on Monday.

U.S. manufacturing output fell for a second straight month in February, in a sign that the world’s biggest economy has been slowing down in the first quarter.

In Asia, Japan’s exports fell for a third straight month in February in a sign of growing strain from slowing global demand.

Despite this, oil prices have gained around a quarter since the start of the year amid U.S. sanctions against Iran and Venezuela, and as the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia — known as OPEC+ — have pledged to withhold 1.2 million bpd in supply to prop up prices.

OPEC’s de-facto leader Saudi Arabia said on Sunday that balancing oil markets was far from done as inventories were still high.

Russia also said production cuts would stay in place at least until June.

As a result, Bernstein forecast an inventory draw of 37 million barrels in the first quarter for the 36 member countries of the Organisation for Economic Co-operation and Development (OECD), which comprises most industrialized nations.

The International Energy Agency (IEA) said on Friday it expected oil markets to be in a modest deficit from the second quarter of 2019.

Key for the supply and demand balance will be the United States, where crude production has soared by around 2 million bpd over the past year, thanks largely to an onshore boom in shale formation drilling.

The number of rigs drilling for new oil production in the United States has been falling in 2019, and hit its lowest level since April 2018 last week, at 833 operating rigs.

However, U.S. crude oil production still increased at the start of 2019, hitting a record 12.1 million barrels per day (bpd) in February, data from the Energy Information Administration (EIA) showed.

Output has since dipped back to 12 million bpd, but that still makes America the world’s biggest crude oil producer.

Oil prices slide on economic slowdown, surging US supply

CNBC

Reuters

KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.32 per barrel, down 34 cents, or 0.6 percent, from their last settlement.
  • Brent crude oil futures were at $65.83 per barrel at 0358 GMT, down 47 cents, or 0.7 percent from their last close.
  • Financial markets, including crude oil futures, took a hit after ECB President Mario Draghi said on Thursday the economy was in “a period of continued weakness and pervasive uncertainty”.
  • China’s February dollar-denominated exports fell 21 percent from a year earlier, coming in far worse than analysts’ expectations, while imports dropped 5.2 percent, official data showed on Friday.
Reusable: Oil well pump jack Permian Basin Texas
An oil well owned an operated by Apache Corporation in the Permian Basin is shown in Garden City, Texas, Feb. 5, 2015.
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Oil prices fell on Friday amid growing investor jitters over the global economy, after the European Central Bank (ECB) warned overnight of continued weakness and as fresh data showed Chinese exports and imports slumped last month.

With surging U.S. supply also unsettling markets, international benchmark Brent crude oil futures were at $65.83 per barrel at 0358 GMT, down 47 cents, or 0.7 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.32 per barrel, down 34 cents, or 0.6 percent, from their last settlement.

Financial markets, including crude oil futures, took a hit after ECB President Mario Draghi said on Thursday the economy was in “a period of continued weakness and pervasive uncertainty”. Europe’s economic weakness comes as growth in Asia is also slowing down.

A slowdown in economic growth would also likely result in stalling fuel demand, putting pressure prices.

China’s February dollar-denominated exports fell 21 percent from a year earlier, coming in far worse than analysts’ expectations, while imports dropped 5.2 percent, official data showed on Friday.

On the supply side, prices have been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC). Together with some non-affiliated producers like Russia, the producer group has pledged to withhold around 1.2 million barrels per day (bpd) of supply to tighten markets and prop up prices.

But these efforts are being undermined by soaring U.S. crude oil production, which has increased by more than 2 million bpd since early 2018, to an unprecedented 12.1 million bpd. That makes America the world’s biggest producer, ahead of Russia and Saudi Arabia.

US to become top oil exporter?

As a result, U.S. crude exports have also been chasing new records, reaching 3.6 million bpd in February – more than OPEC members like the United Arab Emirates, Kuwait or Iran produce.

Some analysts even expect the United States to soon overtake Saudi Arabia as the world’s biggest oil exporter.

“In a pivotal geopolitical shift, the United States will soon export more oil and liquids than Saudi Arabia,” consultancy Rystad Energy said this week. Liquids include non-crude oil products like natural gas liquids (NGLs).

“The (Saudi) kingdom currently exports some 7 million bpd of crude oil plus about 2 million bpd of NGLs and petroleum products, compared with the U.S. now exporting approximately 3 million bpd of crude oil and 5 million barrels of NGLs and petroleum products,” Rystad said.

The consultancy “forecasts that U.S. oil production…will grow by close to another 1 million bpd in 2019.”

Beyond added supply to global markets and likely downward pressure on crude prices, Rystad said this export surge would have huge benefits for the U.S. economy.

“The U.S. trade deficit will evaporate, and its foreign debt will be paid quickly thanks to the swift rise of American oil and gas net exports,” said Rystad Energy senior partner Per Magnus Nysveen.