Oil steady as US resumes Gulf of Mexico output

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Reuters
KEY POINTS
  • Brent crude futures were up 7 cents, or 0.1%, at $66.55 a barrel by 0426 GMT.
  • U.S. West Texas Intermediate crude futures rose by 1 cent to $59.59 a barrel after falling earlier in the session.
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A worker grabs a nozzle at a PTT gas station in Bangkok, Thailand, January 5, 2016.
Athit Perawongmetha | Reuters

Oil prices were steady on Tuesday after falling in the previous session as output in the U.S. Gulf of Mexico resumed after Hurricane Barry swept through over the weekend and as U.S. shale production is expected to rise to a record.

Brent crude futures were up 7 cents, or 0.1%, at $66.55 a barrel by 0426 GMT after dropping earlier in the session. They fell 0.4% overnight.

U.S. West Texas Intermediate crude futures rose by 1 cent to $59.59 a barrel after falling earlier in the session. The U.S. benchmark fell about 1% in the previous session.

Producers on Monday began restoring some of the roughly three-quarters of output that was shut at U.S. Gulf of Mexico platforms ahead of Hurricane Barry.

“The previous storm expectations didn’t pan out, which is good, but you have still got platforms with about 69 percent of output off,” said Phin Ziebell, senior economist at National Australia Bank.

“It was a bit of a shock to supply but a short term one. The market has returned to a bit of normality,” he said.

There was 1.3 million barrels per day (bpd) of oil production offline in the U.S. waters of the Gulf of Mexico on Monday, about 80,000 barrels fewer than on Sunday.

Workers also were returning to the more than 280 production platforms that had been evacuated. It can take several days for full production to be resumed after a storm leaves the Gulf of Mexico.

The market was also weighed down by signs of further increases in output from the United States, which has ridden a wave of shale oil production to rise to become the world’s biggest crude oil producer, ahead of traditional top producers Russia and Saudi Arabia.

U.S. oil output from seven major shale formations is expected to rise by about 49,000 bpd in August, to a record 8.55 million bpd, the U.S. Energy Information Administration said in its monthly drilling productivity report.

Overall U.S. crude production is now more than 12 million bpd.

The rising U.S. output will further undermine the efforts by Russia and Saudi Arabia to reduce global oil inventories by convincing suppliers both in the Organization of the Petroleum Exporting Countries and outside of OPEC to cut production.

The global supplier group, known as OPEC+, agreed earlier this month to extend their production cuts for another nine months.

“On the one hand you have the OPEC output cuts and there’s some geopolitical issues around Iran. But the demand outlook is muted and U.S. supply is perennially good from shale oil, which seems to have structurally changed the nature of the oil market,” said Ziebell.

Oil hits six-week high as storm builds in Gulf of Mexico

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were up 34 cents, or 0.6%, at $60.77 a barrel by 0337 GMT, after earlier touching the highest since May 23 at $60.83. They gained 4.5% in the previous session.
  • Brent crude futures reversed early losses and were up 30 cents, or 0.5%, at $67.31 a barrel, after rising to as high as $67.38, the highest since May 30. They ended Wednesday up 4.4%.
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Oil futures hit a six-week high on Thursday as a storm built in the Gulf of Mexico, threatening crude output, while an incident with a British tanker in the Middle East highlighted ongoing tensions in the region.

U.S. West Texas Intermediate (WTI) crude futures were up 34 cents, or 0.6%, at $60.77 a barrel by 0337 GMT, after earlier touching the highest since May 23 at $60.83. They gained 4.5% in the previous session.

Brent crude futures reversed early losses and were up 30 cents, or 0.5%, at $67.31 a barrel, after rising to as high as $67.38, the highest since May 30. They ended Wednesday up 4.4%.

Five boats believed to belong to Iranian Revolutionary Guards approached a British oil tanker on Wednesday and asked it to stop in Iranian waters close by, but withdrew after a British warship warned them over radio, a U.S. defense official said on Thursday.

Tensions have been high in the Middle East after attacks on tankers and the downing of a U.S. drone by Iran last month, following President Donald Trump’s unilateral withdrawal from a multi-party agreement with Tehran to end its nuclear program.

U.S. oil producers on Wednesday cut nearly a third of Gulf of Mexico crude output ahead of what could be one of the first major storms of the Atlantic hurricane season.

Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a U.S. regulator as oil firms moved workers to safety ahead of a storm expected to become a hurricane by Friday.

Oil prices were also supported by a decline in U.S. inventories. U.S. crude stocks fell 9.5 million barrels in the week to July 5, the Energy Information Administration (EIA) said, more than triple the 3.1 million-barrel draw analysts had expected as refineries ramped up output.

“There is nothing like an early start to the hurricane season to support oil prices, but looking under the hood of the EIA data, it paints an even rosier picture for U.S. oil markets,” said Stephen Innes, managing partner, Vanguard Markets in Bangkok.

“Imports down, exports likely up and refinery utilisation at yearly highs,” he said.

Stocks have now fallen for four consecutive weeks, according to the EIA.

Still, U.S. output is rising again after a brief drop from record levels, according to the EIA. Production last week rose to 12.3 million barrels a day.

“Rising U.S. shale production levels, subdued global economic momentum and existing trade uncertainties will cap bullish gains for crude oil futures,” said Benjamin Lu, analyst at Phillip Futures in Singapore.

Oil prices rise amid OPEC supply cuts, but trade worries weigh

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Reuters

KEY POINTS
  • Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.
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Andrew Burton | Getty Images

Oil prices rose on Monday as ongoing supply cuts led by producer club OPEC kept markets relatively tight, but Brent remained below $70 per barrel on concerns over an ongoing trade war between the United States and China.

Front-month Brent crude futures, the international benchmark for oil prices, were at $69.10 per barrel at 0021 GMT, up 41 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $58.73 per barrel.

“The relative strength of the very short end of the curve likely reflects the market pricing in a known variable of lower supplies from OPEC+,” said Edward Bell, commodity analyst at Emirates NBD bank.

A group of producers led by the Organization of the Petroleum Exporting Countries (OPEC), known as OPEC+, has been withholding supply since the start of the year to tighten the market and prop up prices.

But Monday’s gain could not make up for falls last week, when both crude futures contracts registered their biggest price declines this year amid concerns that the Sino-American trade dispute could accelerate a global economic slowdown.

Money managers cut their net long U.S. crude futures and options positions in the week to May 21, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

“Some signs of low confidence are creeping into positioning data,” Bell said.

In oil futures markets, the trade war effect is better seen beyond the spot market.

“The impact from a trade war is a more medium- to long-term issue and Dec. spreads weakened sharply over the last week,” he said.

Beyond financial markets, there are also signs on the ground of a slowdown in oil demand growth.

China’s automobile sales, a key driver of global oil demand growth, will reach around 28.1 million units this year, unchanged from levels seen in 2018, when the country’s auto market contracted for the first time in more than two decades, state news agency Xinhua reported on Sunday.

The outlook for flat car sales may be too optimistic still, as monthly sales have so far declined for 10 consecutive months.

A bright spot for carmakers, although not for the oil industry, is that sales of new energy vehicles are likely to grow by about 27 percent to hit 1.6 million units, from 1.26 units in 2018, the report said.

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.