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.

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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.

Oil prices fall on signs of rising supplies, ebbing confidence on global economy

CNBC

  • Oil prices declined early on Thursday.
  • The fall in oil prices came on the back of large losses in October for both Brent and WTI.

Oil prices fell early on Thursday, extending losses in previous sessions, amid signs of rising supply and growing concerns that demand might weaken on the prospect of a global economic slowdown.

The Brent crude January futures contract lost 44 cents, or 0.32 percent, to trade at $74.72 per barrel by GMT 0054 GMT. West Texas Intermediate (WTI) crude futures fell 46 cents to $65.01 a barrel.

Both benchmarks posted their worst monthly performance since July 2016 on Wednesday, with Brent falling 8.8 percent for the month and WTI dropping 10.9 percent.

Thursday’s drops came after U.S. Energy Information Administration data showed crude oil inventories climbed for a sixth straight week.

“The strong built in oil inventories is likely to keep downward pressure on oil prices,” ANZ Research analysts said in a note.

Meanwhile a Reuters survey found the Organization of the Petroleum Exporting Countries (OPEC) boosted oil production in October to its highest since 2016, as higher output led by the United Arab Emirates and Libya more than offset a cut in Iranian shipments due to U.S. sanctions, set to start on Nov. 4.

U.S. President Donald Trump said on Wednesday in a presidential memorandum that he had determined there was sufficient supply of petroleum and petroleum products from nations other than Iran to permit a reduction in purchases from that country.

Also weighing on prices is growing concerns over the prospect of a global slowdown amid the ongoing U.S-China trade war, said Bruce Xue, an analyst with Huatai Great Wall Capital Management.

“Oil investors are now betting on the potential of global slowdown,” Xue said.

China delivered disappointing PMI data, with its manufacturing sector in October expanding at its weakest pace in over two years.

Crude oil futures stable on Russian data ahead of US stocks report

S&P GLOBAL, PLATTS

Singapore — Crude oil futures were stable to higher during mid-morning trade in Asia Tuesday, with the Brent futures contract largely unchanged on the back of stable production data from Russia and the NYMEX WTI contract edging higher ahead of the release of weekly US inventory reports.

At 10:30 am Singapore time (0230 GMT), ICE November Brent crude futures were down a marginal 3 cents/b (0.04%) from Monday’s settle at $78.12/b, while the NYMEX October light sweet crude contract was 26 cents/b (0.37%) higher than Friday’s settle at $70.06/b. The US market was closed Monday for Labor Day.

“WTI appears to be catching up with Brent’s climb on Monday while the US markets were closed,” said Vandana Hari, founder Vanda Insights. “Brent appears to be taking a pause this morning after touching three-month highs,” she added.

Russia’s crude and condensate production averaged 11.21 million b/d in August, dipping 8,000 b/d from July, when the country cranked up production significantly, according to preliminary data released Sunday by the Central Dispatching Unit, the energy ministry’s statistics arm.

Russia started raising oil output in June after the the OPEC/non-OPEC coalition agreed to ease production caps in effect since 2017. Russia’s production in August was estimated at 253,000 b/d above the level envisaged under the initial production cut deal, energy minister Alexander Novak said Monday. “In September, the output is expected at the level of July, August,” Novak was quoted as saying by Prime news agency.

“Russia is also unable to significantly expand its production which, following an increase in the summer, is now close to its post-Soviet record high,” said Commerzbank analysts in a note. “It therefore remains unclear whether OPEC will be able to absorb a potentially massive fall in Iranian oil exports due to the US sanctions,” they added.

Meanwhile, NYMEX WTI prices were trading slightly higher during the Asian morning session ahead of the release of weekly US crude inventory data, which will be delayed this week by the Labor Day holiday.

The larger-than-expected draw in US crude inventories for the week ended August 24 has been keeping prices supported, analysts said.

Preliminary reports on last week’s US crude inventory levels are due for release by the American Petroleum Institute on Wednesday and the more definitive numbers by the US Energy Information Administration on Thursday.

Elsewhere, analysts from BNP Paribas have lowered their forecasts for oil prices for the rest of the year in light of stable demand-supply expectations.

“We do not expect oil demand to be materially impacted in the next 6-9 months by economic uncertainty linked to US/China trade tensions and recent concerns over emerging markets,” said Harry Tchilinguirian, senior oil strategist at BNP Paribas.

On the impact of the loss of Iranian crude barrels in the market as a result of the US sanctions, Tchilinguirian said that although an initial supply gap was likely to emerge, given average inventory levels in the OECD, the oil market was expected to resolve the supply gap through higher prices.

“We see WTI averaging $68/b in 2018 and Brent at $74/b. In 2019, we see WTI averaging $74/b and Brent at $79/b,” Tchilinguirian added.

Market participants were also watching Tuesday for developments in the US-China trade war, with the US expected to announce another round of tariffs on Chinese goods.

“We might see renewed downward pressure on crude later this week if the US goes ahead with imposing tariffs on $200 billion worth of Chinese imports,” Hari said.

As of 0230 GMT, the US Dollar Index was up 0.12% at 95.185.