Oil prices slide on economic slowdown, surging US supply

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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.
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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.

Oil edges up on OPEC cuts, US sanctions against Venezuela and Iran

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.45 per barrel at 0234 GMT, up 23 cents, or 0.4 percent, from their last settlement.
  • Brent crude futures were at $66.36 per barrel, up 37 cents, or 0.6 percent.
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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 edged up on Thursday amid ongoing OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran, although prices were prevented from rising further by record U.S. crude output and rising commercial fuel inventories.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.45 per barrel at 0234 GMT, up 23 cents, or 0.4 percent, from their last settlement.

Brent crude futures were at $66.36 per barrel, up 37 cents, or 0.6 percent.

Prices are being supported by efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and other countries – a grouping known as ‘OPEC+’ – to withhold around 1.2 million barrels per day (bpd), a strategy designed to tighten markets.

“In our view, OPEC’s strategy is to rebalance the market as quickly as possible and exit the cuts by the end of June in order to grow production alongside shale producers in the second half of this year,” U.S. investment bank Goldman Sachs said in a note on Wednesday.

U.S. sanctions against the oil industries of OPEC members Iran and Venezuela have also had an impact, traders said.

Venezuela’s state-run oil firm PDVSA this week declared a maritime emergency, citing trouble accessing tankers and personnel to export its oil amid the sanctions.

Surging U.S. supply

Despite these factors, oil remains in plentiful supply thanks to surging U.S. production.

U.S. crude oil stockpiles rose much more than expected last week, with inventories up by 7.1 million barrels to 452.93 million barrels, according to a weekly report by the U.S. Energy Information Administration (EIA) on Wednesday.

Meanwhile U.S. crude oil production remained at a record 12.1 million bpd, an increase of more than 2 million bpd since early 2018.

That, along with the easing of a transportation bottleneck for low-cost U.S. Permian Basin shale oil, could produce sequentially higher production, Goldman Sachs said.

“The balance between rising U.S. production and the OPEC+ efforts to stabilise prices with a production cut was broken by higher than expected U.S. inventories and the OECD warning of lower global growth impacting energy demand going forward,” said Alfonso Esparza, senior analyst at futures brokerage OANDA.

The Organisation for Economic Co-Operation & Development (OECD) said on Wednesday the world economy would grow 3.3 percent in 2019, down 0.2 percentage points from the OECD’s last set of forecasts in November.

Oil dips on US stocks build, production outlook

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Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Chevron Corp and Exxon Mobil Corp released dueling Permian Basin projections on Tuesday pointing to big increases in shale oil production.
  • Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.
  • The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries.
Reusable: Oil pump jack leased by Devon Energy 150922
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices slipped on Wednesday as bullish output forecasts by two big U.S. producers and a build in weekly U.S. crude stockpiles outweighed ongoing OPEC-led production cuts.

International Brent crude futures were at $65.36 per barrel at 0440 GMT, down 50 cents, or 0.8 percent, from their last settlement.

U.S. West Texas Intermediate (WTI) crude oil futures were also down 0.8 percent, or 45 cents, at $56.11 per barrel.

“Crude oil futures continue to demonstrate whippy trades as markets balance between OPEC-led cuts and the effects of rising U.S. production levels,” said Benjamin Lu, commodities analyst at Singapore-based brokerage firm Phillip Futures.

Increasingly event-driven trading was adding to market volatility, he added.

Chevron Corp and Exxon Mobil Corp released rival Permian Basin projections on Tuesday pointing to increased shale oil production.

If realized, the increases would cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.

Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.

U.S. crude inventories rose by 7.3 million barrels in the week ending March 1 to 451.5 million, compared with analysts’ expectations for an increase of 1.2 million barrels, API said. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels.

“An increase in U.S. crude inventories is weighing on oil prices and in the long term, concerns over rising oil production in the Permian region is keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

Official data from the U.S. Department of Energy’s Energy Information Administration is due later on Wednesday.

The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries (OPEC).

OPEC and its allies pledged to curb output by 1.2 million barrels per day, and they are likely to push back their decision whether or not to extend the output cut agreement to June from April, according to sources.

Meanwhile, the market is looking for further signs that the United States and China are making progress in talks to resolve their trade conflict.

U.S. Secretary of State Mike Pompeo said President Donald Trump would reject any trade deal that is not perfect, but added the White House would keep working on an agreement.

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

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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.
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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 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.