Oil remains close to late-2014 highs as ongoing supply cuts reduce inventories

CNBC

  • Oil prices were firm on Friday near three-year highs reached earlier this week.
  • OPEC has been withholding production since 2017 to draw down a supply overhang.
  • Crude prices have also been supported by an expectation that the U.S. will re-introduce sanctions on Iran.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices on Friday stayed near three-year highs reached earlier this week, with ongoing OPEC-led supply cuts and strong demand gradually drawing down excess supplies.

Brent crude oil futures were at $73.74 per barrel at 0657 GMT, down 4 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 13 cents at $68.16 a barrel.

Both Brent and WTI hit their highest levels since November, 2014 on Thursday, at $74.75 and $69.56 per barrel respectively. WTI is set for its second weekly gain, climbing more than 1 percent this week, while Brent is also poised to rise for a second week, adding around 1.5 percent.

Traders said there had been some profit-taking on Friday following Thursday’s multi-year highs.

There was also some caution after Russia’s energy minister Alexander Novak was reported saying that a group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia may this year ease output restrictions.

Producer cartel OPEC and its allies have been withholding production since 2017, helping push up prices. The deal to cut is currently scheduled to expire at the end of 2018.

After a tepid start in 2017, the supply restraint had by this year started tightening markets.
“Commercial inventories in the OECD are now essentially at their five-year average, and drawdowns likely accelerate as refineries emerge from maintenance ahead of peak seasonal demand,” U.S. investment bank Jefferies said on Friday.

Saudi Arabia is 'going to the whip' to drive oil prices higher, says pro

Saudi Arabia is ‘going to the whip’ to drive oil prices higher, says pro  

“OECD commercial inventories could fall back to … a level not seen since the oil price collapse that began in 3Q14. On a day of forward demand basis, we believe cover could drop below 57 days later this year, a level last seen in 2011,” it added.

The tightness is also a result of strong oil demand.

“Global oil demand data so far in 2018 has come in line with our optimistic expectations, with 1Q18 likely to post the strongest year-on-year growth since 4Q10 at 2.55 million barrels per day,” U.S. bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC’s supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

“The first key geopolitical issue is the expiration of the current U.S. waiver of key sanctions against Iran,” said Standard Chartered Bank in a note this week, referring to a deadline on May 12 when U.S. President Donald Trump will decide whether or not to re-impose sanctions.

One factor that could start weighing on prices is rising U.S. production, which has jumped by a quarter since the middle of 2016 to 10.54 million barrels per day (bpd), making the United States the world’s second-biggest producer of crude oil behind only Russia, which pumps almost 11 million bpd.

Oil prices could rally to $100 a barrel if Middle East tensions ‘really kick off,’ analyst says

CNBC

  • “I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.
  • Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday.
  • World leaders continued to mull over military action on Friday, in response to a suspected chemical attack in Syria over the weekend.

What you see is a shift in the oil market, says energy expert

What you see is a shift in the oil market, says energy expert  

Oil prices could soon skyrocket to more than $100 a barrel amid escalating tensions in the Middle East, one oil analyst told CNBC Friday.

Crude futures surged to highs not seen since December 2014 earlier in the week, underpinned by greater geopolitical uncertainty in Syria and elevated concerns over the prospect of imminent military action by Western powers.

“I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.

A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

Brittany Sowacke | Bloomberg | Getty Images
A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

He added market participants had been “laughed out the room” when they projected crude futures to reach either $60 or $70 a barrel six months ago. But heightened tensions in the Middle East had since brought about the prospect of oil prices soaring to more than $100 a barrel later this year, he added.

Geopolitical premium ‘alive and well’

Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday, shortly after President Donald Trump‘s comments about potential missile strikes and reports of dwindling global oil stocks.

Brent crude was trading at $72.26 during lunchtime deals on Friday, up around 0.3 percent, while WTI traded at $67.35, approximately 0.4 percent higher. Both benchmarks have gained about $5 since the start of the week.

An uptick in oil prices followed incendiary comments from Trump on Wednesday. The U.S. president tweeted missiles “will be coming,” in response to a suspected chemical attack in Syria over the weekend. He has since sought to dial back such explosive rhetoric, raising the prospect that an attack on Syria may not be as imminent as it first appeared.

Nonetheless, world leaders continued to mull over military action in the war-torn country on Friday.

President Donald Trump

Getty Images
President Donald Trump

“Trump’s will-he-or-won’t-he antics are here to stay and will, therefore, ensure that the geopolitical risk premium remains alive and well,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note Friday.

He added oil prices were likely to continue to extend their recent gains in the near term.

However, the International Energy Agency (IEA) said Friday it “remained to be seen” whether recently elevated oil prices could be sustained.

In the Paris-based organization’s latest monthly report, the group left its forecast for oil demand unchanged at 99.3 million barrels per day (bpd) in 2018. The IEA’s outlook for supply also remained the same, as it projected non-OPEC growth to reach 1.8 million bpd this year.

Oil markets tense on Middle East crisis, US-China trade spat

CNBC

  • Oil markets remained tense on Thursday on concerns of a military escalation in Syria.
  • Prices were some way off Wednesday’s 2014 highs as bulging American supplies weighed.

Getty Images

Oil markets remained tense on Thursday on concerns over a military escalation in Syria, although prices remained some way off Wednesday’s highest since late 2014 as bulging American supplies weighed.

Ongoing trade disputes between the United States and China also kept markets on edge, traders said.

Brent crude futures were at $72.14 per barrel at 0536 GMT, up 8 cents, or 0.1 percent from their last close.

U.S. WTI crude futures were at $67.03 a barrel, up 21 cents, or 0.3 percent from their last settlement.

In China, Shanghai crude futures were also up, rising 8.9 yuan to 427.1 yuan ($68.03) per barrel, up 2.1 percent and with record volumes traded on the product that was only launched in late March.

Both Brent and WTI hit their highest since late 2014 of $73.09 and $67.45 per barrel on Wednesday, respectively, after Saudi Arabia said it intercepted missiles over Riyadh and U.S. President Donald Trump warned Russia of imminent military action in Syria.

“Geopolitical risks outweighed an unexpected rise in inventories in the U.S.,” ANZ bank said on Thursday.

Ongoing concerns of a prolonged trade dispute between the United States and China are also keeping markets on edge.

China lashed out at the United States on Thursday saying that the trade disputes, in which both sides have threatened to impose tariffs on imports of several products, were “single-handedly provoked by the U.S.” and that Beijing was prepared to escalate the spat if Washington did not back off from its threatened import tariffs.

The Chinese Commerce Ministry also said there had been no bilateral negotiations with the United States on the trade frictions.

Although markets are tense, supplies remain ample especially due to the United States.

U.S. crude oil inventories rose by 3.3 million barrels to 428.64 million barrels.

Meanwhile, U.S. crude oil production last week hit a fresh record of 10.53 million barrels per day (bpd), up by a quarter since mid-2016.

The United States now produces more crude than top exporter Saudi Arabia. Only Russia, at currently just under 11 million bpd, pumps out more.

“Barring any geopolitical shocks, we see limited upside potential for oil prices from current levels due to ongoing oversupply, mainly from the U.S. and Russia, and also a slowing demand growth outlook,” said Georgi Slavov, head of research at commodities brokerage Marex Spectron.

Oil settles higher, scores a second straight weekly gain

MarketWatch

Baker Hughes reports a weekly rise in active U.S. oil-rig count

AFP/Getty Images
By

MYRAP. SAEFONG

MARKETS/COMMODITIES REPORTER

WILLIAMWATTS

DEPUTY MARKETS EDITOR

Oil settled higher Friday, following an intraday U-turn that prompted a swing to a weekly gain.

Expectations for growth in global crude demand outweighed pressure from concerns over strong U.S. production and a weekly rise in the number of active domestic oil rigs.

April West Texas Intermediate crude CLJ8, +1.73%  on the New York Mercantile Exchange rose $1.15, or 1.9%, to settle at $62.34 a barrel after making only modest moves in either direction in early trading. It saw its highest finish since March 6 and climbed roughly 0.5% for the week, according to FactSet data.

May Brent crude LCOK8, +1.34% the global benchmark, added $1.09, or 1.7%, to end at $66.21 a barrel on ICE Futures Europe. That was its highest finish month to date and it rose 1.1% for the week.

The market went “from low volatility to wow,” said Phil Flynn, senior market analyst at Price Futures Group. There really wasn’t any one particular piece of fundamental news that drove the intraday turn higher, he said, adding that “when oil went higher on the week, prices exploded.”

“The consumer sentiment number was strong and that really signals record gasoline demand ahead,” he said. U.S. consumer sentiment in March rose to its highest reading in 14 years.

A monthly oil report from the International Energy Agency on Thursday said that global oil demand should grow by 1.5 million barrels a day, to average 99.3 million barrels a day in 2018. That was an upward revision of 90,000 barrels a day, compared with last month’s report.

Read: How Venezuela could be the ‘final element’ that tips oil market into deficit

But traders have been concerned about surging U.S. shale output.

Offering a peek at future production, Baker Hughes BHGE, +3.45%  reported Friday that the number of active U.S. rigs drilling for oil rose by four to 800 this week. The oil-rig count had fallen by four last week, marking their first decline in seven weeks.

The oil market is also seeing “a lot of short covering ahead of the April expiration on Tuesday” for WTI oil futures, said Flynn.

Meanwhile, expectations that the Trump administration will take a harder line on Iran’s nuclear deal or could move to impose an embargo on Venezuelan crude exports were providing some modest support, said Robert Yawger, director for energy at Mizuho Securities, in a Friday note.

Read: Here’s how Rex Tillerson’s exit could move oil prices

The replacement of Secretary of State Rex Tillerson with Central Intelligence Agency Director Mike Pompeo is seen as heralding a potential tougher stance on Iran that could result in a partial reinstatement of export sanctions, analysts said. Other potential changes, including reports that national security adviser H.R. McMaster could soon be replaced, have underlined those expectations. The White House denied any changes were coming to the National Security Council.

In other energy trading, April natural gas NGJ18, +0.56%  rose 0.3% to $2.688 per million British thermal units, but still marked a weekly loss of 1.6%.

April gasoline RBJ8, +0.87%  added 1.1% to $1.946 a gallon—roughly 2.2% higher for the week, while April heating oil HOJ8, +0.93% rose 1% to $1.912 a gallon, for weekly rise of 1.3%.

Oil prices set for weekly drop as concerns about rising supply weigh

CNBC

  • Oil prices were set to fall this week, with both benchmarks dropping slightly on Friday.
  • Investors were concerned rising supply from the U.S. and other nations threatened to undermine efforts by OPEC and other producers to tighten the market.

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil prices were set to fall this week, with both benchmarks dropping slightly on Friday, on concerns among investors about rising supply from the U.S. and other nations threatening to undermine efforts by OPEC and other producers to tighten the market.

West Texas Intermediate (WTI) oil futures for April delivery fell 3 cents, or 0.1 percent, to $61.16 a barrel at 0354 GMT, after settling up 23 cents on Thursday. WTI is set to fall 1.4 percent this week, reversing the previous week’s 1.3 percent gain.

Brent crude futures trading in London fell 7 cents to $65.05 a barrel after settling up 23 cents. Brent is down 0.7 percent for the week.

Several reports this week renewed investor focus on the potential for rising supply to overwhelm the expected gains in crude demand for 2018.

On Thursday, the International Energy Agency (IEA) said global oil supply increased in February by 700,000 barrels per day (bpd) from a year ago to 97.9 million barrels per day.

The IEA also said supply from producers outside of the Organization of the Petroleum Exporting Countries (OPEC), led by the United States, will grow by 1.8 million bpd this year versus an increase of 760,000 bpd last year.

The supply increase is more than the IEA’s expected demand growth forecast for this year of 1.5 million bpd.

The agency also reported that commercial oil inventories in industrialized nations rose in January for the first time in seven months.

That directly undermines the efforts of producers led by OPEC and Russia, the world’s biggest oil producer, to cut supply in order to reduce global stockpiles.

“The fact that the inventories rose despite intensifying output curbs led by OPEC shows how much non-OPEC supply has risen,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

“Crude prices have been checked by the increase in U.S. supply.”

OPEC and other producers began cutting supply in January 2017 to erase a global crude glut that had built up since 2014.

On Wednesday, the U.S. government reported that crude stockpiles there increased by a more-than-expected 5 million barrels, rising for a third straight week.

Oil prices got scant support from the equities market. Asian stocks declined on Friday, following a four-day losing streak in the S&P 500 a day earlier, amid concerns about more changes in the administration of U.S. President Donald Trump.

Recently, crude futures have moved in sync with equities.

Crude Oil Prices – Weekly Outlook: March 12 – 16

© Reuters.  Crude oil prices score a gain for the week © Reuters. Crude oil prices score a gain for the week

Investing.com – Oil prices rallied sharply on Friday, scoring a weekly gain, as traders cheered data showing the number of U.S. oil rigs fell for the first time in seven weeks, pointing to a potential slowdown in domestic oil output.

Improved appetite for risk-sensitive assets in the wake of strong U.S. jobs data and news of a potential U.S.-North Korea meeting also contributed to oil’s price rise.

U.S. West Texas Intermediate (WTI) crude futures for April delivery surged $1.92, or 3.2%, to close at $62.04 a barrel.

The U.S. benchmark slipped to a three-week low of $59.95 on Thursday, as investors worried over soaring U.S. output levels.

Meanwhile, May Brent crude futures, the benchmark for oil prices outside the U.S., jumped $1.88, or roughly 3%, to settle at $65.49 a barrel.

For the week, WTI crude rose 1.3%, while Brent gained 1.7%.

The number of oil drilling rigs fell by four to 796 last week, General Electric (NYSE:GE)’s Baker Hughes energy services firm said in its closely followed report on Friday.

That marked the first such decline in seven weeks, suggesting the possibility of a fall in future output.

That came after data on Wednesday showed U.S. oil production, driven by shale extraction, rose to an all-time high of 10.37 million barrels per day (bpd), staying above Saudi Arabia’s output levels and within reach of Russia, the world’s biggest crude producer.

Analysts and traders have recently warned that booming U.S. shale oil production could potentially derail OPEC’s effort to end a supply glut.

The Organization of the Petroleum Exporting Countries, along with some non-OPEC members led by Russia, have been restraining production by 1.8 million bpd to curb the market of excess supply. The arrangement, which was adopted last winter, expires at the end of 2018.

In the week ahead, market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.

Oil traders will also focus on monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency to assess global oil supply and demand levels.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday

The U.S. Energy Information Administration (EIA) is to issue a monthly update on shale-oil production levels

Tuesday

The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.

Wednesday

The Organization of Petroleum Exporting Counties will publish its monthly assessment of oil markets.

Later on, the U.S. EIA is to release weekly data on oil and gasoline stockpiles.

Thursday

The International Energy Agency will release its monthly report on global oil supply and demand.

The U.S. government will publish a weekly report on natural gas supplies in storage.

Friday

Baker Hughes will release weekly data on the U.S. oil rig count.

Oil steadies after big fall, but soaring US crude output still weighs

CNBC

  • Oil prices steadied on Thursday after falling the previous day on the back of record U.S. crude production and rising inventories.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices steadied on Thursday after falling the previous day on the back of record U.S. crude production and rising inventories.

Brent crude futures were at $64.49 per barrel at 0100 GMT, up 15 cents, or 0.2 percent, from their previous close. That slight rise came after a more than 2 percent fall the previous day.

U.S. West Texas Intermediate (WTI) crude futures were at $61.29 a barrel, up 14 cents, or 0.2 percent. WTI also fell by more than 2 percent the previous session.

The slight recovery on Thursday came amid a U.S. crude inventory build that was not as big as expected during the current seasonal demand lull at the end of winter, when many oil refineries shut down for maintenance.

“Oil prices bounced back immediately after the release of the weekly oil inventories data from the Energy Information Administration … (where) the headline figure was better than expected,”said Fawad Razaqzada, market analyst at futures brokerage Forex.com.

The EIA reported late on Wednesday that U.S. crude inventories rose by 2.4 million barrels in the week to March 2, to 425.91 million barrels, less than the 2.7 million barrel increase analysts had forecast.

Despite this, oil markets remain under pressure from the seasonal trend of rising inventories, which in the United States have climbed back above the 5-year average of 420 million barrels.

Also looming over oil markets is soaring U.S. production, which last week marked another record, at 10.37 million barrels per day (bpd).

“Crude is … under pressure from rising U.S. production which hit a new high last week, now firmly above Saudi Arabia’s production level,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

At just below 11 million bpd, only Russia currently produces more crude oil than the United States, although the International Energy Agency (IEA) expects even this to change as the United States is set to surge past 11 million bpd by late 2018.

With U.S. output outpacing demand growth, analysts say the Organization of the Petroleum Exporting Countries (OPEC) and Russia, who together with some other producers have been withholding production in order to prop up prices, are under pressure to keep up the supply restraint, even at the cost of market share.

“OPEC may … have to extend its production agreement with Russia and co in order to avoid triggering another 2014-style sell-off in oil prices,” said Razaqzada.