Oil prices rise ahead of OPEC+ meeting on extended output cuts

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Reuters
KEY POINTS
  • Brent crude futures rose 0.91%, or 35 cents, to $38.67 a barrel as of 0427 GMT.
  • West Texas Intermediate (WTI) crude futures rose 0.56%, or 20 cents, to $35.64 a barrel.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil prices rose on Tuesday, with traders waiting to see whether major producers agree to extend their huge output cuts to shore up prices at a virtual meeting expected later this week.

Brent crude futures rose 0.91%, or 35 cents, to $38.67 a barrel as of 0427 GMT.

West Texas Intermediate (WTI) crude <CLc1> futures rose 0.56%, or 20 cents, to $35.64 a barrel.

Brent has doubled over the past six weeks, thanks to supply cuts by the Organization of the Petroleum Exporting Countries and allies, including Russia, a grouping dubbed OPEC+.

Both Brent and WTI prices, however, are still down about 40% for the year so far.

“The whole story is very much based around the supply cuts and the demand recovery,” said Commonwealth Bank commodities analyst Vivek Dhar.

OPEC+ producers are considering extending their output cut of 9.7 million barrels per day (bpd), about 10% of global production, into July or August, at an online meeting likely to be held on June 4.

“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” said Citi’s head of commodities research Edward Morse.

Under the OPEC+ plan agreed in April, the record supply cut was to be for May and June, scaling back to a cut of 7.7 million bpd from July through December. Saudi Arabia has been leading talks to push for extending the heftier cuts, sources told Reuters last week.

“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” said analysts at Dutch bank ING.

An extension could push oil prices to $40, but there would have to be follow-through on that commitment to sustain higher prices, said Commonwealth Bank’s Dhar.

A drop in crude stockpiles at Cushing, Oklahoma, which fell to 54.3 million barrels in the week to May 29, also buoyed prices, traders said, citing a Genscape report on Monday.

A preliminary Reuters poll, however, showed that overall U.S. crude oil stocks likely increased last week.

Trade tension between China and the United States over Beijing’s security clampdown in Hong Kong, as well as manufacturing data on Monday showing Asian and European factories struggling, has kept a lid on gains.

Oil prices slip as wary traders eye upcoming OPEC+ meeting

CNBC

Reuters
KEY POINTS
  • Brent crude fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month.
  • West Texas Intermediate (WTI) crude futures for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT.
Oil-storage tanks are seen from above in Carson, California, April 25, 2020 after the price for crude plunged into negative territory for the first time in history on April 20.
Oil-storage tanks are seen from above in Carson, California, April 25, 2020 after the price for crude plunged into negative territory for the first time in history on April 20.
Robyn Beck | AFP | Getty Images

Oil prices fell nearly 1% on Monday as traders hedged bets with the Organization of the Petroleum Exporting Countries (OPEC) considering meeting as soon as this week to discuss whether to extend record production cuts beyond end-June.

Brent crude fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month.

West Texas Intermediate (WTI) crude futures for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT.

The price falls come after front-month Brent and WTI prices posted their strongest monthly gains in years in May. Gains were boosted by OPEC crude production dropping to its lowest in two decades with demand is expected to recover as more nations emerge from coronavirus lockdowns.

“The focus is very much on OPEC+,” OCBC economist Howie Lee said, referring to the grouping of OPEC and its allies including Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day (bpd) in May and June after the coronavirus pandemic ravaged demand.

“We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up … but if OPEC+ does come up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Lee said.

Still, tensions between the United States and China weighed on global financial markets while traders are also keeping an eye on riots over the weekend that have engulfed major U.S. cities.

Saudi Arabia is proposing to extend record cuts from May and June until the end of the year, but has yet to win support from Russia, sources have told Reuters.

Algeria, which currently holds the OPEC presidency, has proposed an OPEC+ meeting planned for June 9-10 be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no objection to the meeting being brought forward to June 4.

Meanwhile supply in North America is also falling as data from Baker Hughes showed that the U.S. and Canada oil and gas rigs count dropped to a record low in the week to May 29.

Oil drops after China abandons target for 2020 GDP amid coronavirus outbreak

Reuters

KEY POINTS
  • Brent crude fell $1.56, or 4.3%, to $34.50 a barrel by 0323 GMT, after gaining nearly 1% on Thursday.
  • West Texas Intermediate (WTI) crude dropped by $1.79, or 5.3%, to $32.13 a barrel, having gained more than 1% in the last session.
Oil storage tanks stand at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., in Tuapse, Russia, on Monday, March 23, 2020.
Oil storage tanks stand at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., in Tuapse, Russia, on Monday, March 23, 2020.
Andrey Rudakov | Bloomberg | Getty Images

Oil prices slumped on Friday after China’s decision to omit an economic growth target for 2020 renewed concerns that the fallout from the coronavirus pandemic will continue to depress fuel demand in the world’s second-largest oil user.

Brent crude fell $1.56, or 4.3%, to $34.50 a barrel by 0323 GMT, after gaining nearly 1% on Thursday.

West Texas Intermediate (WTI) crude dropped by $1.79, or 5.3%, to $32.13 a barrel, having gained more than 1% in the last session.

China’s National People’s Congress (NPC) kicked off a week-long meeting on Friday with the government saying it omitted the 2020 target, while pledging to issue 1 trillion yuan ($140 billion) of special treasury bonds to support companies and regions hit by the pandemic.

Abandoning the growth target “could be interpreted as putting less focus on infrastructure investment and could be viewed as negative for oil,” said Stephen Innes, chief global market strategist at AxiCorp.

“The commodity market, in general, was looking for a bigger infrastructure pump from the NPC so there is bound to be an element of disappointment,” he said.

Still, both Brent and WTI are heading for a fourth week of gains as more evidence emerged that fuel demand is recovering as countries ease business and social restrictions imposed to counter the coronavirus pandemic.

Gasoline demand is returning with traffic congestion in some of the world’s capitals recovering to year-earlier levels after the lifting of coronavirus, data prepared for Reuters shows.

Traffic flows in Berlin and Tokyo have rebounded, according to the data, while in the United States the easing of restrictions in many states has supported demand for gasoline. The upcoming Memorial Day holiday weekend typically kicks off the U.S. summer driving season.

Oil prices rise to highest since March after U.S. stock drawdown

CNBC

Reuters
KEY POINTS
  • Brent crude futures for July delivery were trading up 62 cents, or 1.7%, at $36.37 per barrel at 0550 GMT, rising for a second day.
  • U.S. West Texas Intermediate (WTI) crude futures for July were up 61 cents, or 1.8%, at $34.10 a barrel, extending its gains into a sixth straight session.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil prices rose on Thursday to their highest since March, as a drawdown of U.S. crude inventories and output cuts by major producers helped ease concerns about a supply glut, offsetting fears over the economic fallout from the Covid-19 epidemic.

Brent crude futures for July delivery were trading up 62 cents, or 1.7%, at $36.37 per barrel at 0550 GMT, rising for a second day.

U.S. West Texas Intermediate (WTI) crude futures for July were up 61 cents, or 1.8%, at $34.10 a barrel, extending its gains into a sixth straight session.

Both prices are at their highest since March 11.

U.S. crude inventories fell by 5 million barrels last week, against expectations in a Reuters poll for a 1.2 million-barrel rise, Energy Information Administration (EIA) data showed, while stocks at the Cushing, Oklahoma, delivery hub dropped by 5.6 million barrels.

“While signs that WTI storage pressures are abating is positive for prices, the latest report shows that the fall in stocks owes more to supply factors than growing product demand,” Capital Economics said in a note issued on Wednesday.

Prices have been boosted lately by shipping data showing the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, a group known as OPEC+, are complying with their pledge to cut 9.7 million barrels per day (bpd).

OPEC itself is encouraged by the rally in prices and strong adherence to output cut pledges, its secretary general said, although sources say the group has not ruled out further steps to support the market.

“With supply being managed through the compliance among OPEC+ and demand recovering in North Asia, particularly in China, things are moving in the right direction in terms of supporting oil prices,” said Victor Shum, vice president of Energy Consulting at IHS Markit.

“If there is no surprise in a second or third wave in the virus attack and key members of OPEC+, Saudi Arabia in particular, are doing more cuts, we expect a gradual recovery will continue in the second half,” he said.

Physical crude markets are signalling a rapid shift from an enormous over-supply at the height of the coronavirus lockdowns in April towards an expected under-supply in the second half of the year.

Still, concerns about the lasting economic impact from the pandemic, especially in the United States, the world’s biggest oil consumer, have applied some downward pressure on prices.

Federal Reserve policymakers repeated a vow to take all steps necessary to shore up the U.S. economy, minutes from the U.S. central bank’s April 28-29 policy meeting released on Wednesday showed.

Oil prices mixed as Brent retreats on profit-taking after rally

CNBC

Reuters
KEY POINTS
  • Brent crude fell 19 cents, or 0.6%, to $34.62 a barrel by 0351 GMT, after earlier touching its highest since April 9.
  • U.S. West Texas Intermediate crude was up 11 cents, or 0.4%, at $31.93 a barrel, giving up some of its earlier gains. It rose as high as $33.44 earlier in the session, hitting its highest since March 16.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were mixed on Tuesday, with Brent pulling back from an early gain on profit-taking, while U.S. crude extended its rally amid signs that producers are cutting output as promised just as demand picks up on a resumption of economic activity.

Brent crude fell 19 cents, or 0.6%, to $34.62 a barrel by 0351 GMT, after earlier touching its highest since April 9.

U.S. West Texas Intermediate crude was up 11 cents, or 0.4%, at $31.93 a barrel, giving up some of its earlier gains. It rose as high as $33.44 earlier in the session, hitting its highest since March 16.

The June WTI contract expires on Tuesday, but there was little sign of a repeat of the historic plunge below zero seen a month ago on the eve of the May contract’s expiry amid signs that demand for crude and derived fuels is recovering from its nadir.

“I would not be surprised to see a short-term pull back as strength that we’ve seen in crude market the last week was quite extraordinary,” said Michael McCarthy, chief market strategist at CMC Markets.

The market was boosted earlier by signs that output cuts agreed by the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia, a group known as OPEC+, are being implemented on the ground.

OPEC+ has cut its oil exports sharply in the first half of May, companies that track shipments said, suggesting a strong start in complying with a new production cut agreement.

“Investors’ sentiment has improved as OPEC+ are apparently slashing output as they promised for this month, with more voluntary cuts expected in June,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

“At the same time, there is growing optimism that the easing of global (coronavirus) lockdowns will help boost economic activity and fuel demand,” he said.

In further support for prices, U.S. production is also falling, with crude output from seven major shale formations expected to fall by a record 197,000 barrels per day in June to 7.822 million barrels per day. That would be the lowest since August 2018, according to the U.S. Energy Information Administration.

Still, demand will recover only slowly as some restrictions remain in place and there is a significant risk of repeat outbreaks and lockdowns, Eurasia Group said in a report issued on Monday.

“Given a global recession, cautious consumers, and a later and potentially worse peak of the coronavirus outbreak in emerging markets such as Latin America, Africa, and South Asia, consumption will remain below 2019 levels of 100 million bpd for some time,” it said.