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Oil Falls for First Day in 5 as OPEC Euphoria Fades; Bonds Gain

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  • Oil Falls for First Day in 5 as OPEC Euphoria Fades; Bonds Gain

Oil slipped from a 16-month high as doubts emerged about how OPEC will implement the first supply curbs in eight years. European bonds gained with stocks.

Crude fell for the first time since the group of oil producers confounded skeptics on Wednesday by agreeing to cut production, a pact that may be challenged by rising output from non-member countries. Bonds rose across the euro-area before a European Central Bank policy meeting this week that may end with the institution’s bond-buying program being extended beyond March. Utilities led European stocks higher as Germany’s top court ruled that RWE AG and EON SE are entitled to compensation for power-production rights they lost because of the government’s decision to exit from nuclear energy.

Questions about how successful OPEC will be in its attempt to bolster prices pared a gain that has kept prices above $51 a barrel since the accord was reached. Crude production from the Organization of Petroleum Exporting Countries rose to a record 34.16 million barrels a day in November, with Nigeria and Libya adding a combined 140,000, according to a Bloomberg survey. Both countries are exempt from making supply cuts because their output has been reduced by conflict or attacks on oil infrastructure, meaning other OPEC members would have to cut deeper to hit the group’s 32.5 million barrel-a-day target.

“It’s a headache for OPEC in terms of increase in production for Libya and Nigeria, definitely that’s a tricky part,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “A lot of buying went on following the OPEC decision and now it’s sort of taking it quietly.”

Commodities

  • West Texas Intermediate crude fell 1.3 percent to $51.14 a barrel as of 7:42 a.m. in New York while Brent dropped 0.9 percent to $54.46, ending a four-day winning streak that was the longest since August.
  • Aluminum fell 1.2 percent to $1,713.50 a metric ton, the biggest drop in a week. The metal will probably tumble next month as an “irrational” increase in prices prompts companies to restart plants, while new capacity also ramps up in the world’s largest supplier, according to China’s top metals industry group. Copper lost 1.4 percent and zinc slid 0.8 percent.

Stocks

  • The Stoxx Europe 600 Index gained 0.4 percent, adding to its 0.6 percent advance from Monday, as investors looked past the political turmoil sparked by the defeat of Italian Prime Minister Matteo Renzi in a constitutional referendum, instead focusing on the improving outlook for the global economy.
  • RWE shares advanced 2.9 percent and EON was 5.3 percent higher.
  • Italy’s FTSE MIB Index recouped 0.9 percent, helped by gains of at least 1.3 percent by UniCredit SpA and Mediobanca SpA.
  • Stoxx 600 energy producers tracked declines in oil prices, which retreated from the highest close in 16 months.
  • The MSCI Emerging Markets Index jumped 0.8 percent.
  • S&P 500 Index futures were little changed before Tuesday’s release of factory and durable goods orders, which may confirm the U.S. economy is gaining strength and giving the Federal Reserve more reason to raise interest rates. The Dow Average swung back to gains Monday, increasing 0.2 percent to an all-time high.

Currencies

  • The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling 0.4 percent Monday.
  • The euro fell 0.2 percent to $1.0749 after ending Monday up 0.9 percent, erasing an earlier slide of as much as 1.5 percent in the wake of the Italian vote.
  • The pound reached a two-month high as the U.K.’s top court heard a second day of arguments in a court case over who has the right to trigger Britain’s exit from the European Union, climbing as much as 0.3 percent to $1.2775.
  • The Australian dollar fell 0.3 percent to 74.52 U.S. cents, after the nation’s central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”

Bonds

  • Italy’s 10-year bond yield declined four basis points to 1.94 percent, after Monday’s increase of eight basis points.
  • Yields on Portugal’s bonds with a similar due date decreased eight basis points to 3.58 percent, while Germany’s rose two basis points to 0.35 percent.
  • Almost all economists surveyed by Bloomberg expect the ECB to announce on Thursday that its bond-buying program will be extended after March, and most foresee an extension of about six months at the current 80 billion euros ($85 billion) a month.
  • Treasury 10-year yields were little changed at 2.39 percent.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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