Oil falls as China trims economic growth target, but OPEC-led cuts support

CNBC

Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Oil demand growth has been flagging along with an economic slowdown, especially in Europe and Asia.

Oil prices fell on Tuesday as China cut its 2019 economic growth target, dimming the outlook for fuel demand, although OPEC-led efforts to cut output still offered some support.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.28 per barrel at 0426 GMT, down 31 cents, or 0.6 percent, from their last settlement.

Brent crude futures were at $65.33 per barrel, down 34 cents, or 0.5 percent.

“Near term … it is hard to get very bullish on oil prices. The market is still working off the surpluses built in H2 2018, keeping OECD commercial inventories stuck above the five-year average,” said energy analysts at economic research firm TS Lombard.

Oil demand growth has been flagging along with an economic slowdown, especially in Europe and Asia.

China said on Tuesday it was targeting economic growth of 6.0 to 6.5 percent in 2019, down from the 6.6 percent growth reported last year, which was already the lowest in decades.

Fuel efficiency is also improving, denting demand growth.

“2018 was the weakest (refined product) demand growth year since 2011,” Bank of America Merrill Lynch said in a note.

Trade talk hopes

Optimism that the United States and China will soon end their bitter trade disputes has offered some support.

China’s Commerce Minister Zhong Shan said on Tuesday that trade talks with the United States have been difficult but that working teams from both countries are continuing with their negotiations.

To prop up the market, the Organization of the Petroleum Exporting Countries (OPEC) has led efforts since the start of the year to withhold around 1.2 million barrels per day (bpd) of supply.

The group was due to decide in April whether to continue withholding supply, but OPEC sources said this week a decision would likely be delayed until June, meaning cuts will continue at least until then.

The OPEC-led supply cuts, as well as U.S. sanctions against its members Iran and Venezuela, come at the same time as U.S. crude output chases ever new records, rising by more than 2 million barrels per day (bpd) since early 2018 and above 12 million bpd for the first time in February.

The cuts to OPEC supply have pushed up the Brent international crude price benchmark due to a shortage of the heavy crudes that OPEC mostly produces. At the same time, the surge in U.S. output is weighing down U.S. WTI prices as there is ample supply of America’s mainly light crudes.

Because of this, energy researchers at TS Lombard said “the Brent-WTI spread can be expected to stay wide.”

WTI’s front-month price spread to Brent has declined from near parity in 2016 to an average discount of $8.50 per barrel since the start of 2019.

During the same time, U.S. crude output has risen by almost 3 million bpd.

Oil climbs on US-China trade deal hopes, OPEC’s deepening supply cuts

CNBC

Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures advanced.
  • The rally came on reports that the United States and China are close to ending their trade disputes
  • Supply from the Organization of the Petroleum Exporting Countries fell to a four-year low in February, a Reuters survey found.
Reusable: Oil prices gas station filling up Bangkok Thailand 160106
A worker grabs a nozzle at a PTT gas station in Bangkok, Thailand, January 5, 2016.
Athit Perawongmetha | Reuters

Oil prices rose on Monday as supply tightened amid output cuts by producer club OPEC and as the United States and China were reported to be close to signing a trade deal that would end a tariff row that has slowed global economic growth.

International Brent futures were at $65.39 a barrel at 0416 GMT, up 32 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $56.08 per barrel, up 28 cents, or 0.5 percent.

The rally came on reports that the United States and China are close to ending their trade disputes, which have weighed on global economic growth.

U.S. President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around March 27 given progress in talks between the two countries, the Wall Street Journal reported on Sunday.

The news added support to a market that has been rallying for the past two months on cuts to production.

Supply from the Organization of the Petroleum Exporting Countries (OPEC) fell to a four-year low in February, a Reuters survey found, as top exporter Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.

“OPEC exports are off by over 1.5 million barrels per day (bpd) since November,” Barclays bank said in a note released on Sunday.

“The supply picture looks generally tighter this year,” said energy analysts at Fitch Solutions in a note on Monday, adding they expected Brent to average $73 per barrel in 2019.

Oil prices have been further pushed up by U.S. sanctions against OPEC-members Iran and Venezuela, which Barclays bank estimates to have resulted in a reduction of around 2 million bpd in global crude supply.

In the United States, there are signs that the oil production boom of the past years, which has seen crude output rise by more than 2 million bpd since early 2018 to more than 12 million bpd, may slow down.

U.S. energy firms last week cut the number of oil rigs looking for new reserves to the lowest in almost nine months as some producers follow through on plans to cut spending despite an over 20-percent increase in crude futures so far this year.

Despite this, Barclays said “we believe that there could be a repeat performance in the second-half of this year” for U.S. oil output.

Oil rises on OPEC’s cuts, but soaring US exports and economic slowdown weigh

CNBC

Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures advanced.

Oil prices rose on Friday as markets tightened amid output cuts by producer club OPEC, but surging U.S. supply and a global economic slowdown prevented crude from climbing further.

U.S. West Texas Intermediate (WTI) crude oil futures were at $57.41 per barrel at 0350 GMT, up 19 cents, or 0.3 percent, from their last settlement.

International Brent crude futures were at $66.59 per barrel, up 28 cents, or 0.4 percent.

Traders said oil markets were currently tightening.

In Venezuela, oil exports have plunged by 40 percent to around 920,000 barrels per day (bpd) since the U.S. government slapped sanctions against its petroleum industry on Jan. 28.

This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.

“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,” Canada’s RBC Capital Markets said in a research note on oil markets.

Despite this, there are signs that point to a more amply supplied market heading further into 2019.

The U.S. Energy Department said on Thursday it was offering up to 6 million barrels of crude from national emergency reserves to raise funds to modernize the U.S. strategic oil reserves.

Additionally, U.S. crude output has hit a record of more than 12 million bpd, pushing exports to an unprecedented 3.6 million bpd in February.

Investment bank RBC estimated that oil from the U.S. Gulf of Mexico port of Houston “can economically move anywhere globally when priced at a discount of $1.70 per barrel relative to the waterborne Brent benchmark”.

Crude loading from Houston last traded at $6.60 a barrel over WTI, which still put it at a discount of more than $2.15 per barrel to Brent.

On the demand side, a Reuters poll showed analysts expect global fuel demand to slow this year amid a broad economic slowdown.

China’s February factory activity fell for a third month as the world’s second-largest economy continued to struggle with weak export orders, a private survey showed on Friday.

The weakness is being felt across the region. South Korea’s exports contracted at their steepest pace in nearly three years in February as demand from its major market China cooled further in yet another sign of faltering momentum in Asia’s fourth-largest economy.

Despite this, fuel consumption especially in Asia’s developing economies, which are key drivers of global oil demand, is so far holding up.

India’s diesel consumption, for instance, is expected to rise to a record this year amid a strong expansion of its heavy duty vehicles amid economic growth of around 7 percent.

Oil slides as US crude production hits record, Asia factory output weakens

CNBC

Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures slipped.
  • Rising U.S. crude production and weakening factory output in China and Japan weighed on prices.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices dipped on Thursday, dragged down by weakening factory output in China and Japan and record U.S. crude output, although markets remained relatively well supported by supply cuts led by producer club OPEC.

International Brent crude futures were at $66.15 per barrel at 0248 GMT, down 24 cents, or 0.4 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.92 per barrel, down 2 cents from their last settlement.

Prices were dragged down by surging American crude oil production, which has risen by more than 2 million barrels per day (bpd) over the last year, to an unprecedented 12.1 million bpd.

Traders said China’s weakening economy also weighed on oil prices.

Factory activity in China, the world’s biggest oil importer, shrank for the third straight month in February. China’s official manufacturing gauge fell to a three-year low, highlighting deepening cracks in an economy facing persistently weak demand at home and abroad.

In Japan, Asia’s second-biggest economy, factory output posted the biggest decline in a year in January as China’s slowdown affects the entire region.

Still, oil markets remain relatively well supported by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as ‘OPEC+’, agreed late last year to reduce output by 1.2 million bpd to prop up prices.

Because of these cuts, U.S. commercial crude inventories fell 8.6 million barrels in the week to Feb. 22 to 445.87 million barrels.

“Crude imports into the U.S. fell 1.6 million bpd last week, to a two-decade low,” ANZ bank said on Thursday.

Oil rises on OPEC-led supply cuts, report of falling US crude inventories

CNBC

Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures gained.
  • U.S. crude oil inventories fell by 4.2 million barrels in the week to Feb. 22, to 444.3 million barrels, the American Petroleum Institute (API) estimated in a weekly report on Tuesday.
  • Meanwhile, OPEC has indicated it will continue to withhold supply despite pressure from U.S. President Donald Trump this week to stop artificially tightening markets.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices rose on Wednesday after a report of declining crude inventories in the country and as producer club OPEC seemed to stick to its supply cuts despite pressure from U.S. President Donald Trump.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.02 per barrel at 0100 GMT, up 52 cents, or 0.9 percent, from their last settlement.

International Brent crude futures were at $65.55 per barrel, up 34 cents, or 0.5 percent from their last close.

U.S. crude oil inventories fell by 4.2 million barrels in the week to Feb. 22, to 444.3 million barrels, the American Petroleum Institute (API) estimated in a weekly report on Tuesday.

Official data will be released by the U.S. Energy Information Administration (EIA) after 1800 GMT.

Oil markets have generally received support this year from supply curbs by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as OPEC+, agreed late last year to cut output by 1.2 million barrels per day (bpd) to prop up prices.

And the group has indicated it will continue to withhold supply despite pressure from U.S. President Donald Trump this week to stop artificially tightening markets.

“Crude oil has been rising lately, not due to strong growth and rising demand but primarily due to a politically orchestrated cut in production from OPEC and friends,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

Despite this, oil remains in ample supply as U.S. crude oil production has risen by more than 2 million bpd over the past year, to a record 12 million bpd, and because demand growth is low because of a global economic slowdown and improving energy efficiency across industries.

“The OPEC+ production cuts have … so far failed to create the tightness needed to support a continued rally,” Hansen said.