Oil prices fall as U.S. rig count rise, trade concerns

CNBC

  • Both U.S. and Brent crude futures slipped.
  • In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices fell by around 1 percent on Monday as drilling activity in the United States, the world’s largest oil producer, picked up and financial markets were pulled down by trade concerns.

A refinery fire in the U.S. state of Illinois, which resulted in the shutdown of a large crude distillation unit, that could cause crude demand to fall also weighed on prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $52.09 per barrel at 0347 GMT, down 63 cents, or 1.2 percent, from their last settlement.

International Brent crude oil futures were down 49 cents, or 0.8 percent, at $61.61 a barrel.

In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Companies added seven oil rigs in the week to Feb. 8, bringing the total count to 854, pointing to a further rise in U.S. crude production, which already stands at a record 11.9 million bpd.

WTI prices were also weighed down by the closure of a 120,000-barrels-per-day (bpd) crude distillation unit (CDU) at Phillips 66’sWood River, Illinois, refinery following a fire on Sunday.

Elsewhere, the head of Russian oil giant Rosneft, Igor Sechin, has written to the Russian President Vladimir Putin saying Moscow’s deal with the Organization of the Petroleum Exporting Countries (OPEC) to withhold output is a strategic threat and plays into the hands of the United States.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June.

OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact.

Analysts said economic concerns were also weighing on crude oil futures.

Vandana Hari of Vanda Insights said in a note that crude prices were dragged down “as China returned from a week-long Lunar New Year holiday and regional stock markets plunged into the red amid resurgent concerns over the U.S.-China trade dispute.”

Trade talks between the Washington and Beijing resume this week with a delegation of U.S. officials travelling to China for the next round of negotiations. The United States has threatened to increase tariffs already imposed on goods from China on March 1 if the trade talks do not produce an agreement.

Preventing crude prices from falling further have been U.S. sanctions on Venezuela, targeting its state-owned oil firm Petroleos de Venezeula SA (PDVSA).

“The issues in Venezuela continue to support prices. Reports are emerging that PDVSA is scrambling to secure new markets for its crude, after the U.S. placed additional sanctions on the country,” ANZ bank said on Monday.

US crude rises 1.9%, settling at $47.96, as trade talks and supply cuts boost oil prices

CNBC

  • Oil prices rise after China said it would hold trade talks with the United States.
  • Crude futures extend gains as the stock market rallies on a strong U.S. jobs report and supportive comments from the Federal Reserve chair.
  • The Energy Information Administration reports U.S. crude stocks were little changed last week, but gasoline and distillate inventories rose sharply.

174362712AB024_OIL_BOOM_SHI

Andrew Burton | Getty Images

Oil prices rose on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown, but gains were capped after the United States reported a sharp build in refined product inventories.

Brent crude, the global benchmark, rose $1.11, or 2 percent, to $57.06 a barrel. ET. U.S. crude oil ended Friday’s session up 87 cents, or 1.9 percent, at $47.96.

After both benchmarks fell sharply last year, prices were on track for solid gains in the first week of 2019, despite recent data that added to concerns about a slowing global economy.

Brent increased about 9 percent for the week, while WTI rose by nearly 6 percent.

Prices pared gains on Friday after data from the U.S. Energy Information Administration showed a sharp increase in product inventories as refiners ramped up utilization rates to 97.2 percent of capacity, the highest rate on record for this time of year.

We want to see crude oil above $50, says equity strategist

We want to see crude oil above $50, says equity strategist  

Gasoline stocks rose 6.9 million barrels last week, while distillate stockpiles grew 9.5 million barrels, the EIA said, compared with forecasts for builds under 2 million barrels. U.S. crude stockpiles were little changed.

“The big build in products has really caught everyone by surprise again,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “The gasoline number was a little bit disappointing because demand was soft and we saw a big build in supply.”

U.S. energy firms cut oil rigs for the first time in three weeks as producers started to reduce their 2019 drilling plans with the collapse in crude prices at the end of last year. Drillers cut eight oil rigs in the week to Jan. 4, bringing the total count down to 877, General Electric‘s Baker Hughes energy services firm said in its closely followed report on Friday.

Oil drew support from comments by China’s commerce ministry, which said Beijing would hold vice-ministerial trade talks with U.S. counterparts on Jan. 7-8. The news helped boost sentiment across riskier assets including the U.S. equity and oil markets.

Washington and Beijing have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and hampering growth.

China’s services sector extended its expansion in December, a private survey showed on Friday, bucking a trend of downbeat economic data.

Frost & Sullivan sees oil prices recovering in 2019

Frost & Sullivan sees oil prices recovering in 2019  

A survey from the Institute for Supply Management on Thursday showed U.S. factory activity slowed more than expected in December, and leading economies in Asia and Europe have reported a fall in manufacturing activity.

A robust U.S. jobs report also added to broader market optimism.

Despite some demand-side worries, oil has received support as supply cuts announced by the global coalition of producers known as OPEC+ kick in.

OPEC, Russia and other non-members agreed in December to reduce supply by 1.2 million barrels per day (bpd) in 2019. OPEC’s share of that cut is 800,000 bpd. A Reuters survey on Thursday found OPEC supply fell by 460,000 bpd in December.

The focus now will be on whether producers deliver further curbs in January to implement the deal fully. Iraq said on Friday it was committed to the deal and would keep its oil production at 4.513 million bpd for the first half of 2019.

Oil opens 2019 with losses on surging supply, signs of economic slowdown

CNBC

  • International Brent crude futures for March were at $53.27 per barrel at 0421 GMT
  • West Texas Intermediate (WTI) futures were at $45.01 per barrel.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Getty Images
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Oil markets dropped by around 1 percent in 2019’s first trading on Wednesday, pulled down by surging U.S. output and concerns about an economic slowdown in 2019 as factory activity in China, the world’s biggest oil importer, contracted.

International Brent crude futures for March were at $53.27 per barrel at 0421 GMT, down 53 cents, or 1 percent, from their final close of 2018.

West Texas Intermediate (WTI) futures were at $45.01 per barrel, down 40 cents, or 0.9 percent.

In physical oil markets, Dubai crude averaged $57.318 a barrel for December, the lowest since October 2017, two traders who participate in the market said on Wednesday.

Similarly, Malaysia’s Petronas set the official selling price of a basket of December-loading Malaysian crude grades at $62.79 a barrel, the lowest since October 2017, the state oil firm said on Wednesday.

Traders said futures prices fell on expectations of oversupply amid surging U.S. production and concerns about a global economic slowdown.

“We are most likely past the peak of this long economic uptrend,” consultancy JBC Energy said in an analysis of 2018.

Factory activity weakened in December across Asia, including in China, as the Sino-U.S. trade war and a slowdown in Chinese demand hit production in most economies, pointing to a rocky start for the world’s top economic growth region in 2019.

Oil prices ended 2018 lower for the first time since 2015, after a desultory fourth quarter that saw buyers flee the market over growing worries about too much supply and mixed signals related to renewed U.S. sanctions on Iran.

“Oil prices … registered their first yearly decline in three years on fears of a slowing global economy and concerns of an ongoing supply glut,” said Adeel Minhas, a consultant at Australia’s Rivkin Securities.

For the year, WTI futures slumped nearly 25 percent, while Brent tumbled nearly 20 percent.

The outlook for 2019 is riddled with uncertainty, analysts said, including the U.S.-China trade concerns and Brexit, as well as political instability and conflict in the Middle East.

A Reuters poll showed oil prices are expected to trade below $70 per barrel in 2019 as surplus production, much of it from the United States, and slowing economic growth undermine efforts led by the Organisation of the Petroleum Exporting Countries (OPEC) to cut supply and prop up prices.

On the production side, all eyes will be on the ongoing surge in U.S. output and on OPEC’s and Russia’s supply discipline.

“Don’t underestimate shale producers and the wider U.S. oil industry in general. Too often this year the market pushed stories … bottlenecks(pipelines, frack crews, truck drivers, etc.), yet U.S. oil production will have grown by a massive 2+ million barrels per day between 1.1.2018 and 1.1.2019,” JBC Energy said.

U.S. crude output rose to an all-time high of 11.537 million barrels per day (bpd) in October, the Energy Information Administration (EIA) said on Monday. That makes the U.S. the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Weekly data, which is more open to revisions, was reported last week at 11.7 million bpd in late December by the EIA.

Oil prices rise as OPEC output cuts seen to be deeper than previously expected

CNBC

  • The Organization of the Petroleum Exporting Countries (OPEC) plans to publish details of output cut quotas, OPEC’s secretary-general Mohammad Barkindo said in a letter reviewed by Reuters on Thursday.
  • WTI and Brent futures have declined more than 30 percent from their peak in October.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices climbed on Friday after tumbling 5 percent in the previous session on signs OPEC’s production cuts that start next month will be deeper than expected.

Benchmark Brent crude futures were up 27 cents, or 0.5 percent, at $54.62 per barrel at 0448 GMT, after dropping $2.89 in the previous session. Brent is set to drop 9.4 percent for the week.

U.S. West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.7 percent, to $46.22 per barrel. WTI is set to decline about 9.5 percent for the week.

Crude prices have fallen along with major equity markets as investors fret about the strength of the global economy heading into next year. Further concerns were raised as the United States, the world’s biggest oil consumer, may have a government shutdown later on Friday.

The Organization of the Petroleum Exporting Countries (OPEC) plans to release a table detailing output cut quotas for its members and allies such as Russia in an effort to shore up the price of crude, OPEC’s secretary-general Mohammad Barkindo said in a letter reviewed by Reuters on Thursday.

Barkindo said to reach the proposed cut of 1.2 million barrels per day, the effective reduction for member countries was 3.02 percent.

That is higher than the initially discussed 2.5 percent as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.

“The current oil prices will force OPEC to increase compliance with the production cut deals, supporting Brent prices,” said Wang Xiao, head of crude research at Guotai Junan futures.

“The temporary recovery in prices has been driven by short- sellers buying back,” said Wang, referring to investors buying futures to close out positions that profit from falling oil prices.

WTI and Brent futures are down more than 30 percent from their peak in October on concerns of oil demand will drop because of a slowing global economy and signs of a supply glut.

Stephen Innes, head of trading for Asia-Pacific at OANDA said in a note that market volatility was “getting exaggerated by immensely thin liquidity conditions, risk sentiment, and holiday market participation”.

Oil prices soar more than 4.5 percent after US, China suspend trade hostilities

CNBC

  • WTI crude futures surged more than 5 percent following the weekend announcement of a 90-day pause on additional trade tariffs between China and the U.S.
  • Meanwhile, OPEC — along with non-OPEC member Russia — is expected to announce oil supply cuts at its upcoming meeting on Dec. 6.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices surged on Monday after the United States and China agreed to a 90-day truce in their trade war, and ahead of a meeting this week by producer club OPEC that is expected to result in a supply cut.

U.S. West Texas Intermediate (WTI) crude futures were at $53.63 per barrel at 0358 GMT, up $2.73 per barrel, or 5.4 percent from their last close.

U.S. crude prices were further pushed up by an announcement from Canada that Alberta province will force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage. Most of Alberta’s oil is exported to the United States.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore said Alberta’s decision was “an unprecedented step to ease a crisis in the Canadian energy industry.”

International Brent crude oil futures were up $2.8 per barrel, or 4.8 percent, at $62.30 a barrel.

China and the United States agreed during a weekend meeting in Argentina of the Group of 20 (G-20) leading economies not to impose additional trade tariffs for at least 90 days while the pair hold talks to resolve existing disputes.

The trade war between the world’s two biggest economies has weighed heavily on global trade, sparking concerns of an economic slowdown.

Crude oil has not been included in the list of hundreds of products each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.

“The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise,” U.S. bank Morgan Stanley said in a note to clients on Monday. It added, though, that trade negotiations would be “bumpy”.

Overall, Morgan Stanley said it saw a “slight upside in our 2019 growth outlook” because of the renewed talks.

Looking ahead, oil traders will eye a meeting by the Organization of the Petroleum Exporting Countries (OPEC) on Dec. 6. At the meeting, the producer group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a production overhang that has pulled down crude prices by around a third since October.

No official announcements regarding supply cuts have yet been made, but most analysts expect a reduction of 1 million-1.4 million bpd versus October levels, which were the highest by OPEC as a group since December 2016.

Russian oil output stood at 11.37 million bpd in November, down from a post-Soviet record of 11.41 million bpd it reached in October, Energy Ministry data showed on Sunday.

“Expectations are for coordinated cuts to reduce an oversupplied market and to realign with slower growth in demand,” said Fitch Solutions in a note on Monday.

Meanwhile, oil producers in the United States continue to churn out record amounts of oil, with crude output at an unprecedented level of more than 11.5 million bpd.

With drilling activity still high, most analysts expect U.S. oil production to rise further in 2019.