Crude Oil Turns Lower as Rally Stalls


By Alison Sider and Neanda Salvaterra Features Dow Jones Newswires

Oil prices moved into the red, erasing much of this week’s gains as investors took profits.

Prices had been on the rise earlier Thursday following concerns that Iraqi Kurdistan’s independence vote could hit supply from the oil-rich region and after U.S. data Wednesday showed that record-high exports of U.S. crude and additional demand from refineries helped drain 1.8 million barrels from U.S. crude inventories last week.

But investors pulled back, sending oil prices tumbling amid concerns that the rally had gone too far.

“I think more than anything there was some profit-taking here,” said Tariq Zahir, managing member of Tyche Capital Advisors. “It’s had a heck of a run.”

U.S. crude futures fell 58 cents, or 1.11%, to $51.56 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 49 cents, or 0.85%, to $57.41 a barrel on ICE Futures Europe.

Prices also tumbled after data-tracking firm Genscape said storage at the Cushing, Okla., storage hub rose to 65.1 million barrels, up by close to 2 million barrels from Friday.

Oil prices have been climbing the past few weeks amid renewed faith in the efforts of the Organization of the Petroleum Exporting Countries and other major oil producers to eliminate the global supply glut.

But bearish factors are on the horizon: U.S. production has continued to rise and producers could take advantage of the higher prices to ramp up more quickly.

Oil’s recent rally represents a return to “the optimism we saw earlier in the year, that the reduction of supply through the 1.8 million [barrel] cut is basically taking hold and tightening the market,” said Gene McGillian, research manager at Tradition Energy.

Still, he said the market could be vulnerable to a selloff if data in the coming weeks don’t continue to show the glut of oil is shrinking.

U.S. and global oil benchmarks have diverged in recent weeks, with the gap between the two trading at its widest in more than two years.

Brent has been bolstered by tightening supplies abroad. This week it also jumped on fears that the Iraqi Kurdish independence referendum would lead to conflicts that could interrupt the flow of Kurdish oil. West Texas Intermediate, the U.S. reference price, has lagged behind as U.S. fuel makers were hobbled by Hurricane Harvey and unable to process as much crude.

The price gap has led to a surge of exports from the U.S. as buyers take advantage of the discount. U.S. crude exports rose to a record 1.5 million barrels a day last week, according to the U.S. Energy Information Administration.

“The only real crude surplus left is in the U.S., and, as we whittle down the last of the stored barrels, the world is turning to the U.S. as the supplier of last resort,” Energy Aspects analysts wrote in a research note.

Some expect oil prices to continue to rise.

“We are still viewing this as a near term bull market capable of fresh highs,” Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a client note. “We expect an upside reversal tomorrow amidst various contract expirations.”

Gasoline futures fell 2.22 cents, or 1.34%, to $1.6318 a gallon. Diesel futures fell 1.43 cents, or 0.77%, to $1.832 a gallon.

US crude jumps to more than 6-week closing high of $49.89, as demand-driven rally continues


US crude demand outlook improves

US crude demand outlook improves   

Oil prices rose on Thursday, a day after the International Energy Agency forecast the market would continue to tighten as fuel demand increased.

U.S. West Texas Intermdediate crude hit a nearly four-month high at $50.50 a barrel. The contract ended Thursday’s trade up 59 cents, or 1.2 percent, at $49.89. WTI popped above its 200-day moving average level on an intraday basis for the first time since Aug. 10.

Benchmark Brent crude topped out at $55.99, the highest level since in five months. It was up 46 cents at $55.62 a barrel by 1:57 p.m. The contract remained in technically overbought territory for a second day in a row.

Brent has now climbed by more than $10 a barrel over the past three months and is close to where it was at the beginning of the year.

Oil demand growth is strengthening: IEA

Oil demand growth is strengthening: IEA   

On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.

The agency said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

“The IEA revising up its 2017 global oil demand growth forecast, together with persistent weakness in the U.S. dollar index, has prompted bullish sentiment in the oil market,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

“Anticipation is growing that this could quicken the pace of oil market rebalancing.”

The U.S. dollar index was down 0.2 percent against a basket of currencies, making oil cheaper for holders of other currencies. Last week, the dollar index fell to its lowest level since the start of 2015.

The supply side of the equation also looks promising, Barclays Research said. That said, “a softer market balance is in store for next year, which should ensure an OPEC/non-OPEC deal remains in place beyond March 2018,” Barclays added.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, have agreed to reduce crude output by about 1.8 million bpd until next March in an attempt to support prices.


Oil disruption following Harvey is easing: IEA

Oil disruption following Harvey is easing: IEA   

BP Chief Executive Bob Dudley told Reuters in an interview on Thursday that oil prices were likely to stay between $50 and $60 as major producers kept output restricted.

“We’re all trying to make our way in this world of between $50 and $60 and I would expect that to continue.”

This week’s gains came despite U.S. data showing another big build in U.S. crude inventories due to Hurricane Harvey.

Data from the Energy Information Administration showed a build in U.S. crude inventories last week of 5.9 million barrels, exceeding expectations.

U.S. gasoline stocks slumped by 8.4 million barrels, the largest weekly decline since the data was first recorded in 1990. U.S. distillate stocks fell by 3.2 million barrels.

— CNBC’s Tom DiChristopher and Gina Francolla contributed to this report.

Oil ends at 4-week high as refineries reopen

New hurricane sparks fears of potential damage to U.S. oil production

Hurricane Irma, a record Category 5 storm, is heading toward Florida.


Markets reporter

Christopher Alessi

The U.S. oil benchmark closed at a four-week high Wednesday, reflecting concerns about a potential hit to production from Hurricane Irma as well as renewed demand for crude as Gulf Coast refineries previously shut down by Hurricane Harvey reopened.

West Texas Intermediate U.S. crude oil for October CLV7, +0.22%  rose 50 cents, or 1%, to close at $49.16 a barrel, the highest settlement since Aug.9. Brent crude LCOX7, +0.59% the global benchmark, gained 82 cents, or 1.5%, to end at $54.20 a barrel, its highest close since April 18.

“Oil market participants have become used to tropical storms causing no lasting damage to the energy infrastructure. This may change now, prompting the market to price in something of an uncertainty premium. Many market participants viewed the latest fall in the WTI price as excessive in any case,” analysts at Commerzbank said in a note.

The upswing in crude prices marked a swift reversal from last week, when prices had languished in the wake of Hurricane Harvey. The storm knocked out more than 20% of U.S. refining capacity, cutting demand for crude and weighing on prices.

Refining capacity has since started to come back online, providing support for crude. That, however, is weighing on gasoline prices that rallied last week as refineries shut down and created a short-term shortage. Gasoline for October delivery RBV7, -0.60%  fell 1.15 cents, or 0.7%, to $1.7595 a gallon.

At the same time, the market is preparing for potential disruptions to oil production in the Gulf of Mexico as the result of Hurricane Irma, which made landfall in the Caribbean earlier on Wednesday, and other brewing storms. If crude output is hindered by the new storms it would boost prices, the analysts said.

The Harvey-related refinery shutdowns are expected to have contributed to a build in crude-oil stocks and a fall in gasoline inventories when the Energy Information Administration provides its weekly update on Thursday morning.

Analysts surveyed by S&P Global Platts produced a consensus forecast for a 2.7 million-barrel rise in crude stocks, while gasoline inventories are expected to fall 4.2 million barrels. The survey found distillate stocks are expected to drop 1.9 million barrels while refinery utilization is expected to show a sharp fall of 7 percentage points.

In addition, inventories at Cushing, Okla., a storage hub that serves as the delivery point for Nymex crude futures, could see significant increases in the next few weeks as a result of Harvey, according to Geoffrey Craig, oil futures editor at S&P Global Platts.

Ahead of the EIA data, the American Petroleum Institute, an industry trade group, will provide its weekly inventory figures late Wednesday.

Oil prices also responded positively to suggestions Tuesday by the Russian energy minister, Alexander Novak, that Russia and Saudi Arabia would be open to extending their output cut agreement.

“The strong cooperation of the leading oil producers in combating the ‘oil glut’ is making market participants hopeful that stocks may be quickly reduced, which is boosting the price rise,” the Commerzbank analysts said.

The Organization of the Petroleum Exporting Countries — of which Saudi Arabia is the largest member — and 10 producers outside the cartel, including Russia, first agreed late last year to cap production at around 1.8 million barrels a day lower than peak Oct. 16 levels, with the aim of reining in the global oil glut and sending prices higher.

The deal, which was extended in May until March 2018, has been undermined by falling compliance, growing U.S. output and an unexpected surge in production from Libya and Nigeria — two member states exempted from the agreement because their oil industries had been damaged by civil unrest.

Analysts said they were looking ahead to official U.S. data this week on crude inventory levels, which have fallen consistently in recent months, while cautioning that the information was likely to be less reliable than usual as a result of Harvey.

In other energy products, October natural gas NGV17, +0.60%  rose 0.9% to end at $3 per million British thermal units. Heating oil futures HOV7, +0.05%  rose 0.7%, to $1.7595 a gallon.

—Sara Sjolin contributed to this article.