Oil prices tread water as market eyes global risks

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Reuters

KEY POINTS
  • Brent crude futures were down 3 cents by 0300 GMT at $64.20.
  • U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.
Reusable: Oil storage refinery Australia Caltex Oil 141014
Jason Reed | Reuters

Crude prices were little changed on Monday as traders weighed geopolitical risks against the impact of the Sino-U.S. trade war on the global economy, although last week’s better-than-expected U.S. jobs data offered some support.

Brent crude futures were down 3 cents by 0300 GMT at $64.20. U.S. West Texas Intermediate (WTI) was up 6 cents at $57.57 a barrel.

“A very cautious open this morning supported by a better than expected (non-farm payrolls),” said Stephen Innes, managing partner at Vanguard Markets in Bangkok. “Traders remain incredibly cautious about the dimmer global economic overhang.”

Both oil benchmarks fell last week as concerns about a slowing global economy outweighed risks to supply. Brent fell more than 3% and WTI shed more than 1.5%.

U.S. job growth rebounded strongly in June, with government payrolls surging, the Labor Department’s closely watched employment report showed on Friday, suggesting May’s sharp slowdown in hiring was probably a one-off.

Employers added 224,000 jobs last month, the most in five months, the report showed.

But the U.S.-China trade war has dampened prospects of global economic growth and oil demand.

The lack of concrete progress in resolving the acrimonious trade war between the United States and China, however, means the bar could be very high for the U.S. Federal Reserve not to lower borrowing costs at its July 30-31 policy meeting.

White House Economic advisor Larry Kudlow has confirmed top representatives from the United States and China will meet in the coming week to continue trade talks.

Still, Japan’s core machinery orders fell for the first time in four months in May, posing the biggest monthly drop in eight months in a worrying sign that global trade tensions are taking a toll on corporate investment.

Oil received some support from simmering tensions over Iran and after an extension last week to output cuts by OPEC and its allies.

Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from U.S. President Donald Trump, who pulled out of the pact last year.

“Geopolitical risks remain plentiful, but the start of the week could see Iran worries ease,” said Edward Moya, senior market analyst at OANDA.

Meanwhile, U.S. energy companies this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Oil prices fall amid signs of slowing US demand, economic concerns

CNBC

Reuters

KEY POINTS
  • Front-month Brent crude futures were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.
  • U.S. West Texas Intermediate crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.
Reusable: Oil pump jack in North Dakota 150128
An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices fell more than 0.5% on Thursday, weighed down by data showing a smaller-than-expected decline in U.S. crude stockpiles and worries about the global economy.

Front-month Brent crude futures, the international benchmark for oil prices, were down 1% at $63.21 per barrel by 0538 GMT. Brent closed up 2.3% on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures were down 1% at $56.78 per barrel. WTI closed up 1.9% on Wednesday.

U.S. crude inventories dropped by 1.1 million barrels last week, the Energy Information Administration (EIA) said on Wednesday. That compared with analyst expectations for a decrease of 3 million barrels.

Inventories fell less than expected as U.S. refineries last week consumed less crude than the week before and processed 2% less oil than a year ago, the EIA data showed, despite being in the midst of the summer gasoline demand season.

That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy. New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, adding to the economic concerns.

The weak U.S. data followed a report of slow business growth in Europe last month as well.

“Tossing aside the short-term nature of fluctuations around the inventory data, it’s impossible to escape the economic reality that we are in the midst of a global manufacturing downturn,” said Stephen Innes, managing partner, Vanguard Markets.

The weakness in oil was offset slightly by the outlook for global supplies.

U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.

Drillers cut five oil rigs in the week to July 3, bringing the total count down to 788, General Electric Co’s GE.N Baker Hughes energy services firm said in its closely followed report on Wednesday.

Global supply is also expected to contract as the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil production cuts until March 2020.

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.