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Oil Slides Toward $48 as Skepticism Over OPEC Cuts Returns

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  • Oil Slides Toward $48 as Skepticism Over OPEC Cuts Returns

Oil investors are back to being skeptical over whether OPEC-led production cuts are draining a global glut fast enough, keeping prices below $49 a barrel and driving crude toward a second weekly loss.

Futures fell as much as 1 percent in New York. Neither a pledge by the two biggest producers of the Organization of Petroleum Exporting Countries to strengthen their commitment to curbs, or declining U.S. crude stockpiles is managing to lift prices. That’s as America pumps more while the inventory drop is seen as seasonal. OPEC’s own output is increasing on more supplies from Libya, which is exempt from the group’s deal to reduce production.

While U.S. crude inventories dropped to the lowest level since October, gasoline stockpiles last week expanded for the first time since early June, indicating that consumption boosted by the summer driving season may be waning. OPEC on Thursday raised demand estimates for its crude through 2018, but higher Libyan output is undermining its plan to shrink a global glut.

“The power of OPEC rhetoric is diminishing,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “The underlying demand picture has slightly improved, but it’s a glacial improvement for the oil market.”

West Texas Intermediate for September delivery lost as much as 49 cents to $48.10 a barrel on the New York Mercantile Exchange, and was at $48.20 at 2 p.m. in Hong Kong. Total volume traded was about 71 percent above the 100-day average. Prices are down 2.8 percent this week.

Brent for October settlement fell as much as 52 cents, or 1 percent, to $51.38 a barrel on the London-based ICE Futures Europe exchange. Prices on Thursday dropped 80 cents, or 1.5 percent, to $51.90. The global benchmark is down 1.8 percent this week and traded at a premium of $3.13 to October WTI.

OPEC increased its forecasts for the amount of crude it needs to supply in 2017 and 2018 by about 200,000 barrels a day for each year, according to a monthly report Thursday from its secretariat in Vienna. Libya boosted output by 154,300 barrels a day, while production from all members reached 32.87 million a day.

Oil-market news:

  • Saudi Arabia’s Energy Minister Khalid Al-Falih and his Iraqi counterpart Jabbar al-Luaibi met in Jeddah and agreed to ensure coordination of their policies, according to a report from the Saudi Press Agency.
  • Al-Falih said deeper output cuts must be collective and agreed to by all 24 countries participating in an agreement to curb production, newspaper Asharq al-Awsat reports, citing comments at a press conference with Iraq’s oil minister.

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

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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