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.

Oil rises on expected OPEC cuts, but surging US supply drags

CNBC

  • Oil prices on Friday were mainly supported by expectations that the Organization of the Petroleum Exporting Countries would start withholding supply soon.
  • Meanwhile, U.S. crude oil production reached another record last week.

174362712AB024_OIL_BOOM_SHI

Andrew Burton | Getty Images

Oil prices rose on Friday amid expectations of supply cuts from OPEC, although record U.S. production dragged.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.84 per barrel at 0353 GMT, up 38 cents, or 0.7 percent, from their last settlement.

Brent crude oil futures were up 48 cents, or 0.7 percent, at $67.10 per barrel.

Prices were mainly supported by expectations the Organization of the Petroleum Exporting Countries (OPEC) would start withholding supply soon, fearing a renewed rout such as in 2014 when prices crashed under the weight of oversupply.

OPEC’s de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5 percent of global supply, sources told Reuters this week.

However, Morgan Stanley warned a cut by the Middle East dominated producer cartel may not have the desired effect.

“The main oil price benchmarks – Brent and WTI – are both light-sweet crudes and reflect this glut,” the U.S. bank said.

“OPEC production cuts are usually implemented by removing medium and heavier barrels from the market but that does not address the oversupply of light-sweet.”

Due to the structural oversupply that has emerged in the market from record production by many countries, Morgan Stanley said that “OPEC cuts are inherently temporary (because) all they can do is shift production from one period to another”.

While OPEC considers withholding supply, U.S. crude oil production reached another record last week, at 11.7 million bpd, according to U.S. Energy Information Administration (EIA) data published on Thursday.

U.S. output has surged by almost a quarter since the start of the year.

The record output meant U.S. crude oil stocks posted the biggest weekly build in nearly two years.

Crude inventories soared 10.3 million barrels in the week to Nov. 9 to 442.1 million barrels, the highest level since early December 2017.

This surge contributed to oil prices falling by around a quarter since early October, taking many by surprise.

“Oil bulls, us included, have capitulated and we no longer see oil climbing to $95 per barrel next year,” Bank of America Merrill Lynch said in a note.

While sentiment has turned bearish, some analysts warn that 2019 could be tighter than expected.

“We expect 2019 oil demand to reach 101.1 million bpd,” natural resources research and investment firm Goehring & Rozencwajg said, up from just under 100 million bpd this year.

At the same time, the firm said production outside North America was set to disappoint.

Add OPEC’s expected supply cuts, and Goehring & Rozencwajg said “those investors who are able to adopt a contrarian stance … and stomach the volatility … are being presented with an excellent investment opportunity” to buy into oil after the recent slump.

Bank of America agreed, saying “we believe oil is oversold and will likely bounce up from the current levels, as OPEC+ dials back production in December”.

Oil prices jump 2 percent after Saudi Arabia announces December supply cut

CNBC

  • Oil prices rose by about one percent on Monday after top exporter Saudi Arabia announced a cut in supply for December, seen as a measure to halt a market slump that had seen crude decline by 20 percent since early October.
  • International benchmark Brent crude oil futures were at $71.11 per barrel at 0051 GMT, up 93 cents, or 1.3 percent from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $60.73 per barrel, up 54 cents, or 0.9 percent from their last settlement.

Oil pumpjacks in silhouette at sunset.

Oil pumpjacks in silhouette at sunset.

Oil prices jumped more than 1.5 percent on Monday after top exporter Saudi Arabia announced a supply cut in December and other producers also considered reductions heading into 2019.

Front-month Brent crude futures, a benchmark for global oil prices, were at $71.59 per barrel at 0749 GMT, up 2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures rose 1.6 percent to $61.15 per barrel.

Saudi Arabia plans to reduce oil supply to world markets by 500,000 barrels per day (bpd) in December, its energy minister said on Sunday, as the country faces uncertain prospects in getting other producers to agree to a coordinated output cut.

Khalid al-Falih told reporters that Saudi Aramco’s customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 percent.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).

An official from Kuwait, also an OPEC member, on Monday said that major oil exporters over the weekend had “discussed a proposal for some kind of cut in (crude) supply next year”, although the official did not provide any detail.

OPEC’s second-biggest producer Iraq has also indicated it may join in such a move.

Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said OPEC was “focused on mitigating downside risks” after crude prices declined by around 20 percent over a month following a supply surge, particularly from the top three producers, the United States, Russia and Saudi Arabia.

For consumers, the 20 percent oil price fall since early October was a relief.

“This (price fall) is great news for the externally challenged economies of Asia like Indonesia and Philippines, India too, and helps also where inflation has been a concern,” Robert Carnell, chief economist and Head of Research at ING Asia, told the Reuters Global Markets Forum on Monday.

Major emerging economies like India, Indonesia and Turkey came under strong pressure earlier this year as their currencies slumped against the dollar just as oil prices surged, eroding demand.

Beyond demand concerns, a big concern for Saudi Arabia and other traditional producers from the Middle East-dominated OPEC is the surge in U.S. output.

U.S. energy firms last week added 12 oil rigs in the week to Nov. 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

The rig count indicates U.S. crude output, already at a record 11.6 million bpd, will increase further.

“One thing that is abundantly clear, OPEC is in for a shale shocker as U.S. crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Oil prices fall into bear market on rising supply, economic concerns

CNBC

  • Both Brent and WTI have declined by around 20 percent since seeing four-year highs in early October.
  • One Reuters analyst said Brent could “slip further into a range of $68.59-$69.69 per barrel.”

Oil markets on Friday remained weak as rising supply and concerns of an economic slowdown pressured prices, with U.S. crude now down by around 20 percent since early October.

U.S. West Texas Intermediate (WTI) crude oil futures were at $65.60 per barrel at 0509 GMT, down 4 cents, or 0.1 percent from their last settlement. WTI is set to fall for a fifth week, down 4.1 percent so far this week.

Front-month Brent crude oil futures were at $70.69 a barrel, 4 cents above their last close. Brent is set for a 2.9 percent drop for the week, its fifth straight week of declines.

Both Brent and WTI have declined by around 20 percent from the four-year highs they reached in early October.

“Oil prices continue to decline and are now officially in a bear market, having declined 20 percent from their (October) peak,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Reuters technical commodity analyst Wang Tao said on Friday that “Brent oil may slide further into a range of $68.59-$69.69 per barrel.”

That would be the first time Brent has fallen below $70 since April.

Analysts said the main downward price pressure came from rising supply, despite the U.S. sanctions against Iran that were imposed this week, as well as concerns over an economic slowdown.

“As OPEC exports continue to rise, inventories continue to build which is putting downward pressure on oil prices,” analysts at Bernstein Energy said.

“A slowdown in the global economy remains the key downside risk to oil,” Bernstein added.

The decline in prices over the past weeks follows a rally between August and October when crude rose ahead of the re-introduction of sanctions against Iran’s oil exports on Nov. 5.

The sanctions, however, are unlikely to cut as much oil out of the market as initially expected as Washington has granted exemptions to Iran’s biggest buyers which will allow them to continue buying limited amounts of crude for at least another six months.

China National Petroleum Corp (CNPC) said on Friday it was continuing to take oil from Iranian oilfields in which it has ownership stakes.

“Our main cooperation with Iran is upstream investment. Lifting equity oil is recouping our investment there,” Hou Qijun, deputy general manager for CNPC, said on the sidelines of an industry event in Shanghai.

Bernstein Energy expects “Iranian exports will average 1.4-1.5 million barrels per day (bpd)” during the exemption period,” down from a peak of almost 3 million bpd in mid-2018.

Oil prices fall amid supplied market, Iran sanction exemptions

CNBC

  • Oil prices fell on Wednesday, extending losses from the previous session, with markets well supplied amid rising production and U.S. sanction waivers that allow Iran’s biggest customers to continue buying its crude.
  • Front-month Brent crude oil futures were at $71.85 per barrel at 0115 GMT, down 28 cents, or 0.4 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $61.76 per barrel, down 45 cents, or 0.7 percent, from their last settlement.

80848321DM012_High_Oil_Pric

David McNew | Getty Images

Oil prices fell on Wednesday, extending losses from the previous session, with markets well supplied amid rising production and U.S. sanction waivers that allow Iran’s biggest customers to continue buying its crude.

Front-month Brent crude oil futures were at $71.85 per barrel at 0115 GMT, down 28 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $61.76 per barrel, down 45 cents, or 0.7 percent, from their last settlement.

The increasingly well supplied market has turned sentiment, which until early October was largely bullish, pushing Brent to four-year highs of more than $86 per barrel ahead of the Iran sanctions.

Brent and WTI have lost 17.4 and 19.7 percent in value respectively from their most recent peaks in early October.

U.S. bank J.P. Morgan said “part of the recent sell-off in oil was due to excessive crude in the physical markets…from elevated production from OPEC whilst Iranian supply was still in the market despite reduction in reported exports.”

Fawad Razaqzada, market analyst at futures brokerage Forex.com, said he had become “quite bearish on oil prices” due to lower demand growth forecasts, higher supply and Iran sanctions waivers.

According to Refinitiv Eikon data, Iranian crude exports have fallen to 1 million barrels per day (bpd) so far in November, down from almost 2 million bpd in October and around 3 million bpd in mid-2018.

U.S. bank Morgan Stanley said “oil market fundamentals have softened (as) supply continues to come in higher-than-expected, particularly from the U.S., Middle East OPEC, Russia and Libya.”

Output from the world’s top-3 producers Russia, the United States and Saudi Arabia, broke through 33 million bpd for the first time in October, meaning these three countries alone now meet more than a third of the almost 100 million bpd of global consumption.

Iraq, the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia, is targeting production capacity of 5 million bpd in 2019, up from 4.6 million bpd currently, Oil Minister Thamer Ghadhban said on Tuesday.

“The market is well supplied, and we see a balanced rather than tight market ahead. This no longer supports our $85 per barrel year-end and 1H19 forecast,” Morgan Stanley said.

Instead, the bank said it expected Brent to average around $77.5 per barrel to mid-2019.

With production rising, inventories are swelling.

U.S. crude stocks climbed by 7.8 million barrels in the week ending Nov. 2 to 432 million, data from the American Petroleum Institute showed on Tuesday.

Despite the well supplied market, Razaqzada warned that it would be “increasingly costly for inefficient producers to maintain output at current levels”.

Venezuela’s crude production was in “free-fall” and could soon drop below 1 million bpd, the International Energy Agency’s Executive Director Fatih Birol warned on Tuesday, down from the more than 2 million bpd it averaged last year.