Oil falls but prices still elevated after attacks on Saudi facilities

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Reuters
KEY POINTS
  • Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT.
  • West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.
  • Attacks on Saudi oil facilities heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages.
  • Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.
GP: Aramco oil facility Saudi Arabia 190719
Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019.
Fayez Nureldine | AFP | Getty Images

Oil fell more than 1% on Tuesday as the market hung on tenterhooks over the threat of a military response to attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half and sent prices soaring by the most in decades.

The Saturday attack heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the U.S.-China trade war rages. Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.

Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT, and West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.

Prices surged nearly 20% in intra-day trading on Monday in response to the attacks, the biggest jump in almost 30 years, before closing around 15% higher.

Equities and other markets were also pressured on Tuesday.

“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

“However, the (geopolitical) risk premium … which has been basically ignored by markets in favour of growth worries in recent months, is likely to be priced in going forward,” she said.

A gauge of oil-market volatility on Monday rose to the highest level since December of last year, and trading activity showed investors expect higher prices in coming months.

Japan said on Tuesday it would consider a coordinated release of oil reserves if necessary.

U.S. President Donald Trump said on Monday it looked like Iran was behind attacks on the Saudi oil facilities but stressed he did not want to go to war.

Tehran has rejected the charges that it was behind the drone strikes.

Relations between the United States and Iran have deteriorated since Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

Washington also wants to pressure Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.

“With the U.S. ‘locked and loaded’ awaiting signs from Saudi Arabia that Iran was involved, tensions in the Middle East could get worse before they get better. Under these circumstances, the price of oil could remain elevated for some time yet,” City Index analyst Fiona Cincotta said.

“However, let’s not also forget that the demand picture isn’t great right now, which will dampen the oil price quickly. Most recently China’s industrial production figures disappointed overnight,” Cincotta said.

The attack on state-owned producer Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais cut its output by 5.7 million barrels a day and threw into question its ability to maintain oil exports.

The company has not given a specific timeline for the resumption of full output.

Oil prices gain after bigger-than-expected fall in US stockpiles

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Reuters
KEY POINTS
  • Brent crude futures rose 51 cents, or 0.6%, to $62.89 a barrel by 0405 GMT.
  • West Texas Intermediate (WTI) futures were up 54 cents, or 0.9%, to $57.94 a barrel.
Reusable: oil derrick Apache Corp Texas worker
Getty Images

Oil prices traded higher on Wednesday after an industry report said U.S. crude stockpiles fell last week by more than twice the amount that analysts in a Reuters poll had forecast.

Brent crude futures rose 51 cents, or 0.6%, to $62.89 a barrel by 0405 GMT, while West Texas Intermediate (WTI) futures were up 54 cents, or 0.9%, to $57.94 a barrel.

Prices had ended lower on Tuesday, squeezed by speculation of sanctions-hit Iranian crude returning to the market following U.S. President Donald Trump’s move to fire national security adviser John Bolton, a noted Iran policy hawk.

But they rebounded after American Petroleum Institute (API) data late on Tuesday showed U.S. crude oil and gasoline stocks fell last week, while distillate stocks built.

“Oil should remain supported in Asian trading, mostly supported by the overnight API crude inventory data,” said Jeffrey Halley, senior market analyst at OANDA.

The API numbers had U.S. crude inventories down by 7.2 million barrels in the week ended Sept. 6 to 421.9 million, compared with analysts’ expectations in a Reuters poll of a decrease of 2.7 million barrels.

Halley said he was expecting a draw down of 4.8 million barrels when official numbers are released by the Energy Information Administration (EIA) later on Wednesday.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.4 million barrels, the API said, while refinery crude runs rose by 208,000 barrels per day.

Gasoline stocks fell by 4.5 million barrels, the industry group said, compared with analysts’ expectations of an 847,000-barrel decline in a Reuters poll.

Prices had risen sharply before Bolton’s removal, boosted after Prince Abdulaziz bin Salman, Saudi Arabia’s new energy minister, said the kingdom’s oil policy would not change and a deal with other producers to cut output by a combined 1.2 million barrels per day would be maintained.

Iran’s oil exports were slashed by more than 80% due to re-imposed sanctions by the United States after Trump last year exited the 2015 nuclear deal between Tehran and world powers.

Oil inches up amid Middle East tensions

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Reuters
KEY POINTS
  • Brent crude futures rose 4 cents to $63.30 a barrel by 0335 GMT.
  • The international benchmark rose more than 1% in the previous session, following Iran’s seizure of a British tanker last week that stoked fears of supply disruptions from the energy-rich Gulf.
  • West Texas Intermediate (WTI) crude futures were unchanged at $56.22 per barrel.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices edged higher on Tuesday amid lingering concerns about possible supply disruptions in the Middle East, but an overall weaker demand outlook kept a lid on gains, helped by a vow by the International Energy Agency (IEA) to take swift action to keep global oil markets adequately supplied.

Brent crude futures rose 4 cents to $63.30 a barrel by 0335 GMT. The international benchmark rose more than 1% in the previous session, following Iran’s seizure of a British tanker last week that stoked fears of supply disruptions from the energy-rich Gulf.

West Texas Intermediate (WTI) crude futures were unchanged at $56.22 per barrel.

“Downward revisions on global oil demand, along with rising challenges in the macroeconomic environment, have capped bullish gains for oil prices,” said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based Phillip Futures.

Meanwhile, the IEA said it was closely monitoring developments in the Strait of Hormuz as relations between Iran and Britain remain tense.

“The IEA is ready to act quickly and decisively in the event of a disruption to ensure that global markets remain adequately supplied,” it said, adding that executive director Fatih Birol has been in talks with IEA members, associate governments and other nations.

“Consumers can be reassured that the oil market is currently well supplied, with oil production exceeding demand in the first half of 2019, pushing up global stocks by 900,000 barrels per day,” the IEA said in a statement.

The potential for disruption in the Middle East has come amid a more fundamental souring of market sentiment in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand.

“Lower global demand estimates…have hit crude prices in the last couple of weeks,” said Alfonso Esparza, senior market analyst at OANDA.

“Weather and geopolitical disruptions have been temporary and only the OPEC+ deal has given traders clarity with the group’s commitment to reducing the oil glut at their expense.”

The ‘OPEC+’ deal refers to coordinated efforts by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, including Russia, to withhold supplies since the start of the year to prop up prices.

Oil gains as Middle East Gulf tensions flare, Libya oil field shut

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Reuters
KEY POINTS
  • Brent crude futures climbed 85 cents, or 1.4%, at $63.32 a barrel by 0404 GMT. The international benchmark rose by $1 earlier.
  • West Texas Intermediate (WTI) crude futures were up 47 cents, or 0.8%, at $56.10 a barrel.
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An Iraqi worker gauges gas emissions from an oil pipe at the Daura oil refiner
Getty Images

Oil prices rose on Monday on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Middle East and after Libyareported the shut down of its largest oil field.

Brent crude futures climbed 85 cents, or 1.4%, at $63.32 a barrel by 0404 GMT. The international benchmark rose by $1 earlier.

West Texas Intermediate (WTI) crude futures were up 47 cents, or 0.8%, at $56.10 a barrel.

WTI fell over 7% and Brent fell more than 6% last week.

“Falling global demand and rising U.S. stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf,” Edward Moya, senior market analyst at OANDA in New York, said in a note.

Iran’s Revolutionary Guards said on Friday they had captured a British-flagged oil tanker in the Gulf in response to Britain’s seizure of an Iranian tanker earlier this month.

The move has increased the fear of potential supply disruptions in the Strait of Hormuz at the mouth of Gulf, through which flows about one-fifth of the world’s oil supplies.

Britain was weighing its next moves on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized the ship.

A senior United States administration official said on Friday the U.S. will destroy any Iranian drones that fly too close to its ships.

A day earlier, the U.S. said one of its navy ships had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

Crude oil supply outages and curbs also helped lift prices higher.

“Oil prices got a small boost this morning after Libya’s (NOC) declared force majeure on Sharara crude loaded at Zawiya port,” said Stephen Innes, managing partner at Vanguard Markets.

Libya’s National Oil Corporation (NOC) declared a force majeure on Saturday at the country’s largest oilfield, El Sharara, after it was shut down the previous day causing a production loss of about 290,000 barrels per day (bpd).

Meanwhile, data late last week showed shipments of crude oil from Saudi Arabia, the world’s top oil exporter, fell to a 1-1/2 year low in May.

U.S. energy firms reduced the number of oil rigs operating for a third week in a row as drillers follow through on plans to cut spending amid a global supply glut. The United States is now the world’s largest oil producer.

Speculative money is flowing back into the oil markets in response to the escalating dispute between Iran and the United States and other western nations playing out in the Gulf waters along with the signs of falling supply.

Hedge funds and other money managers raised their combined futures and option’s positions on U.S. crude for a second week and increased their positions in Brent crude as well, according to data from the U.S. Commodity Futures Trading Commission and the Intercontinental Exchange.

Oil prices gain, US crude little changed after inventory data

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Reuters
KEY POINTS
  • West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.
  • Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.
Reusable: Idled oil drilling rigs North Dakota
Stacked rigs are seen along with other idled oil drilling equipment in Dickinson, North Dakota, June 26, 2015.
Andrew Cullen | Reuters

Oil prices rose on Wednesday after steep falls in the previous session, although U.S. crude trailed gains for international benchmark Brent after U.S. crude inventories fell less than expected.

West Texas Intermediate crude futures were up 6 cents at $57.68 by 0327 GMT, having fallen 3.3% on Tuesday.

Brent crude futures were up 25 cents at $64.60, or 0.4%. They ended down 3.2% in the previous session.

Crude inventories fell by 1.4 million barrels in the week to July 12 to 460 million, industry group the American Petroleum Institute (API) said on Tuesday. That compared with analysts’ expectations for a decrease of 2.7 million barrels.

Official data is due out later today from the U.S. government’s Energy Information Administration (EIA). If it confirms the fall it will be the fifth consecutive weekly decline, the longest stretch since the beginning of 2018.

“Market participants are looking ahead to the weekly IEA oil inventory data for the U.S., which is expected to show yet another draw down,” Abhishek Kumar, head of analytics at Interfax Energy in London.

“Nevertheless, oil production in the Gulf of Mexico returning to normal following Hurricane Barry will limit price gains, ” Kumar said.

More than half the daily crude production in the U.S. Gulf of Mexico remained offline on Tuesday in the wake of Hurricane Barry, the U.S. drilling regulator said, as most oil companies were re-staffing facilities to resume production.

The Bureau of Safety and Environmental Enforcement said 1.1 million barrels per day of oil, or 58% of the region’s total, and 1.4 billion cubic feet per day of natural gas output remained shut.

The smaller than expected decline in crude stocks suggested production shut-ins caused by Hurricane Barry late last week had little impact on inventories.

Gasoline stocks also fell, declining by 476,000 barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel decline.

Distillate fuels stockpiles, which include diesel and heating oil, rose by 6.2 million barrels, compared with expectations for a 613,000-barrel gain, the API data showed.

Oil prices fell on Tuesday after U.S. President Donald Trump said progress has been made with Iran, signaling tensions could ease in the Middle East.

However, Iran later denied it was willing to negotiate over its ballistic missile program, contradicting a claim by U.S. Secretary of State Mike Pompeo, and appearing to undercut Trump’s statement.

Tensions between the United States and Iran over Tehran’s nuclear program have lent support to oil futures, given the potential for a price spike should the situation deteriorate.