Oil extends gains amid signs of China demand pickup, global supply overhang fading

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Reuters
KEY POINTS
  • Brent crude was up 39 cents, or 1.3% at $31.52 a barrel by 0333 GMT, after rising nearly 7% on Thursday. The global benchmark is heading for a 1.8% gain on the week after rising for the previous two weeks.
  • West Texas Intermediate (WTI) oil was up 19 cents, or 0.7%, at $27.75 a barrel, having jumped 9% in the previous session. WTI is heading for a third weekly increase, up more than 12%.
An aerial view shows a cruise ship (L) and tanker vessel anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
An aerial view shows a cruise ship (L) and tanker vessel anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices rose on Friday, extending day-earlier gains, as data showed demand for crude picking up in China after the easing of curbs to stem the coronavirus outbreak, boosting hopes that the global supply overhang may start to fade.

Brent crude was up 39 cents, or 1.3% at $31.52 a barrel by 0333 GMT, after rising nearly 7% on Thursday. The global benchmark is heading for a 1.8% gain on the week after rising for the previous two weeks.

West Texas Intermediate (WTI) oil was up 19 cents, or 0.7%, at $27.75 a barrel, having jumped 9% in the previous session. WTI is heading for a third weekly increase, up more than 12%.

Amid supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, bright spots are also emerging on the demand side. Data released on Friday showed China’s daily crude oil use rebounded in April as refineries ramped up operations.

Still the market mood remains far from euphoric, with the coronavirus pandemic far from over and new clusters emerging in some countries where lockdowns have been eased.

“The fundamentals in the market are clearly improving,” ING Research analysts said in a note. “But we still believe that in the near term, the upside is limited given that we are still in a surplus environment … There is plenty of inventory for the market to digest.”

There is optimism that stockpiles may be on the wane.

The International Energy Agency said it expects crude inventories to fall by about 5.5 million barrels per day (bpd) in the second half of this year.

Meanwhile U.S. crude inventories fell for the first time in 15 weeks, the Energy Information Administration said on Wednesday.

Output cuts will boost the trend towards lower inventories, but U.S. crude is unlikely to see strong gains.

“WTI crude will struggle to break above the $30 level until both the economic outlook improves for the U.S. and some of the downside risks ease,” said Edward Moya, senior market analyst at OANDA.

On the production side, OPEC and associated producers — collectively known as OPEC+ — had already agreed to cut output by a record of nearly 10 million bpd before Saudi Arabia this week extended its planned reductions for June, pledging to lower supply by nearly 5 million bpd.

Saudi Aramco, the world’s largest oil exporter, reduced the volume of crude it will supply to at least three buyers in Asia by as much as 30% for June, three sources with knowledge of the matter told Reuters on Thursday.

OPEC+ now wants to extend overall production cuts beyond May and June when the group next meets, sources told Reuters earlier this week.

Oil jumps as slowdown in new China coronavirus cases eases fuel demand concerns

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Reuters
KEY POINTS
  • Brent crude was up 98 cents, or 1.8%, at $54.99 per barrel at 0335 GMT.
  • U.S. West Texas Intermediate (WTI) rose 81 cents, or 1.4%, to $50.65 a barrel.
GP: Sinopec oil China 190322
A man working in a filling station of Sinopec, China Petroleum and Chemical Corporation, in Shanghai, China, on March 22, 2018.
Johannes EIsele | AFP | Getty Images

Oil prices climbed on Wednesday as China reported its lowest daily number of new coronavirus cases since late January, stoking investor hopes that fuel demand in the world’s second-largest oil consumer may begin to recover from the epidemic.

Brent crude was up 98 cents, or 1.8%, at $54.99 per barrel at 0335 GMT. U.S. West Texas Intermediate (WTI) rose 81 cents, or 1.4%, to $50.65 a barrel.

According to data through Tuesday, the growth rate of new coronavirus cases in China has slowed to the lowest since Jan. 30. Still, international experts remained cautious over forecasting when the outbreak might reach a peak.

Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.

“As the growth rate of new cases has decreased … that has improved the (market) sentiment,” said Kim Kwang-rae, commodities analyst at Samsung Futures in Seoul.

The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday. Both benchmarks are down more than 20% from highs reached in January.

The U.S. Energy Information Administration (EIA) on Tuesday cut its global oil demand growth forecast for this year by 310,000 bpd as the virus outbreak crimps oil consumption in China.

Demand worries flipped the oil market into a contango last week, a market structure where prices for near-term contracts are lower than those for later contracts, indicating ample supplies.

Contango spread in Brent is unchanged at 15 cents per barrel from a week earlier, while the WTI contango is at 24 cents a barrel, from 17 cents last week.

“Front month prices are down around 20% since the start of the outbreak, with Brazilian, West African and Russian crudes – all popular with independent (Chinese) refiners in Shandong – under pressure,” said Roger Diwan, vice president of financial services at IHS Markit, in a note.

On the supply side, the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, recommended a further cut of 600,000 bpd last week to stem the oil price fall.

However, Russia has been hesitant to commit to the additional cut, while Saudi Arabia wanted global major oil producers to agree a quick oil supply cut.

U.S. crude inventories rose by 6 million barrels in the week to Feb. 7 to 438.9 million barrels, beating analysts’ expectations for an increase of 3 million barrels, data from industry group the American Petroleum Institute showed.

Official EIA data is due on Wednesday at 10:30 a.m. EDT (1530 GMT).

Oil steady on easing US-Iran tensions, eyes on China trade deal

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Reuters
KEY POINTS
  • Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.
  • Oil prices had surged after the killing of an Iranian commander by a U.S. drone strike and the launch of Iranian missiles in retaliation, but then slumped as the United States and Iran stepped back from the brink of direct conflict.
  • Meanwhile, expectations of thawing trade tensions between the United States and China, the world’s two biggest oil consumers, have offered support for prices.
GP: Saudi Arabia oil processing plant damaged 190920
A damaged installation in Saudi Arabia’s Abqaiq oil processing plant is pictured on September 20, 2019.
Fayez Nureldine | AFP | Getty Images

Oil prices held steady on Monday as fears of conflict between the United States and Iran eased, with investors shifting their focus to this week’s scheduled signing of an initial U.S.-China trade deal, which could boost economic growth and demand.

Brent crude was down 2 cents at $64.96 per barrel at 0438 GMT, while West Texas Intermediate (WTI) was up 3 cents at $59.07 a barrel from the previous session.

Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander and Iran retaliated with missiles launched against U.S. bases in Iraq, but slumped again as Washington and Tehran retreated from the brink of direct conflict.

Global benchmark Brent touched $71.75 per barrel last week before ending on Friday below $65.

“The possibility of the war between the United States and Iran has disappeared … For the week, the signing of the U.S.-China trade deal would lift oil prices on expectations for higher demand,” said Kim Kwang-rae, a commodities analyst at Samsung Futures in Seoul.

Backwardation in Brent, a market structure where prices for near-term contracts are higher than those for later contracts, is currently at 72 cents per barrel, from 84 cent a week earlier, whereas the WTI backwardation is at 4 cents a barrel from 23 cents last week.

Backwardation tends to reflect tightening supplies, and the narrowing of the values indicate that worries over supply disruption are receding.

“The fundamentals for WTI remain weak for the coming months and stocks are expected to build at Cushing,” said Virendra Chauhan, an oil analyst at Energy Aspects in Singapore.

“For Brent, which is a broader indicator of the global crude market, it is a combination of supply and demand,” he added.

“Sentiment appears to have turned a corner on the trade-war front, while some green shoots regarding industrial activity and the start of fiscal stimulus, could mean demand surprised to the upside.”

A U.S.-China trade deal is due to be signed in Washington on Wednesday.

Oil prices steady after last week’s gains, look to US-China talks

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Reuters
KEY POINTS
  • Brent crude futures were at $63.30 a barrel at 0512 GMT, unchanged from the previous session. The contract rose 1.3% last week.
  • West Texas Intermediate (WTI) crude were also unchanged at $57.72 a barrel, having gained 0.8% last week.
GP: oil barrels 191118
An employee holds a control panel as barrels are filled with lubricant oil in Torzhok, Russia, on March 21, 2014.
Andrey Rudakov | Bloomberg | Getty Images

Oil prices were little changed on Monday following steady gains in the previous week with investors awaiting fresh clues over prospects for a trade deal between the United States and China, shrugging off concerns over steadily rising oil supplies.

Brent crude futures were at $63.30 a barrel at 0512 GMT, unchanged from the previous session. The contract rose 1.3% last week.

West Texas Intermediate (WTI) crude were also unchanged at $57.72 a barrel, having gained 0.8% last week.

The “crude oil market is flat on Monday morning, as price consolidates after Friday’s big rally,” said Margaret Yang, market analyst at CMC Markets.

Oil futures gained nearly 2% on Friday as comments from a top U.S. official raised optimism for a U.S.-China trade deal, but worries about increasing crude supplies capped prices.

The 16-month trade war between the world’s two biggest economies and oil consumers has slowed growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

China and United States had “constructive talks” on trade in a high-level phone call on Saturday, state media Xinhua said, but offered few other details in a report released on Sunday.

“In the short term, U.S.-China trade talks and OPEC meeting in early December are the two biggest events oil traders are watching for,” said Yang.

The Organization of the Petroleum Exporting Countries (OPEC) said on Thursday it expected demand for its oil to fall in 2020, supporting a view among market participants that there is a case for the group and other producers like Russia — collectively known as ‘OPEC+’ — to maintain limits on production that were introduced to cope with a supply glut.

OPEC and its allies are expected to discuss output policy at a meeting on Dec. 5-6 in Vienna. Their existing production deal runs until March.

A monthly report from the International Energy Agency (IEA) released on Thursday put downward pressure on prices, after it estimated that non-OPEC supply growth would increase to 2.3 million barrels per day (bpd) next year compared, with 1.8 million bpd in 2019, citing production from the United States, Brazil, Norway and Guyana.

Data released on Thursday also showed weekly U.S. crude stockpiles grew by 2.2 million barrels, the Energy Information Administration (EIA) said, exceeding the 1.649 million-barrel rise forecast by analysts in a Reuters poll.

Oil prices drop after data shows industrial profits decline in China

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Reuters
KEY POINTS
  • Brent crude was down 12 cents, or 0.2%, at $61.90 a barrel by 0409 GMT, having gained more than 4% last week, its best weekly gain since Sept. 20.
  • West Texas Intermediate (WTI) crude futures were down 16 cents, 0.3%, at $56.50 a barrel, after rising more than 5% last week, also the biggest weekly increase since Sept. 20.
GP: Tullow Oil 190812 EU
The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
Nicky Loh | Bloomberg | Getty Images

After strong gains last week, oil prices were slightly lower on Monday as data released in China reinforced signs that its economy is slowing, though progress in China-U.S. trade talks has supported prices.

Brent crude was down 12 cents, or 0.2%, at $61.90 a barrel by 0409 GMT, having gained more than 4% last week, its best weekly gain since Sept. 20.

West Texas Intermediate (WTI) crude futures were down 16 cents, 0.3%, at $56.50 a barrel, after rising more than 5% last week, also the biggest weekly increase since Sept. 20.

Profits at Chinese industrial companies fell for the second straight month in September as producer prices continued their slide, highlighting the toll a slowing economy and protracted U.S. trade war are having on corporate balance sheets.

“There have been some small profit-taking sells on the weak China data released on Sunday and unwinding of weekend hedges,” said Stephen Innes, Asia Pacific market strategist at Axi Trader.

“But the market remains well supported on the dip,” he added, pointing to signs of progress in China-U.S. trade talks.

The two sides issued a statement on Friday saying they are close to finalizing some parts of a trade agreement.

U.S. energy companies also reduced the number of oil rigs operating this week, leading to a record 11-month decline as producers follow through on plans to cut spending on new drilling.

Russia’s energy ministry said on Friday it is continuing close cooperation with Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers to enhance market stability and predictability.

The statement came a day after Igor Sechin, CEO of Russian oil producer, Rosneft, said the September attacks on Saudi oil assets created doubts over its reliability as a supplier. The attacks temporarily shut down around half of the kingdom’s oil output.

OPEC+, an alliance of OPEC members and other major producers including Russia, has since January implemented a deal to cut output by 1.2 million bpd to support the market.

The pact runs to March 2020 and the producers meet to review policy on Dec. 5-6.

Elsewhere, a suggestion by U.S. President Donald Trump that Exxon Mobil or another U.S. oil company could operate Syrian oil fields drew rebukes from legal and energy experts.

Money managers cut their net long U.S. crude futures and options positions in the week to October 22, the U.S. Commodity Futures Trading Commission said on Friday.