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Brent Crude Oil Breaks $80 Price Level Amid Supply Concerns

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Oil markets climbed for a sixth day on Tuesday, reversing earlier losses, on fears over tight supply while surging prices of liquefied natural gas (LNG) and coal also lent support.

Brent crude futures gained $1.05, or 1.3%, to $80.58 a barrel at 0645 GMT, after reaching its highest since October 2018 at $80.75 earlier in the session. It surged 1.8% on Monday.

U.S. West Texas Intermediate (WTI) crude futures rose $1.06, or 1.4%, to $76.51 a barrel, the highest since July 6. It jumped 2% the previous day.

“Investors remained bullish as supply disruptions in the United States from hurricanes are continuing for longer than expected at a time when demand is picking up due to easing lockdown measures and the wider rollouts of COVID-19 vaccination,” said Chiyoki Chen, chief analyst at Sunward Trading.

Hurricanes Ida and Nicholas, which swept through the U.S. Gulf of Mexico in August and September, damaged platforms, pipelines and processing hubs, shutting most offshore production for weeks.

Also weighing on supply, top African oil exporters Nigeria and Angola will struggle to boost output to their quotas set by the Organization of the Petroleum Exporting Countries (OPEC) until at least next year as underinvestment and nagging maintenance problems continue to hobble output, sources at their respective oil firms warn.

Their battle mirrors that of several other members of the OPEC+ group who curbed production in the past year to support prices when COVID-19 hit demand, but are now failing to ramp up output to meet soaring global fuel needs as economies recover.

The supply issues are occurring as countries ease their COVID-19 movement restrictions, potentially boosting demand.

Japan, the world’s fifth-biggest oil user, plans to lift a coronavirus state of emergency in all regions on Thursday as the number of new cases falls and the strain on the medical system eases, Economy Minister Yasutoshi Nishimura said.

Analysts also say rising prices of spot liquefied natural gas (LNG) and coal may support higher oil prices.

“Oil demand could pick up by an additional 0.5 million barrels per day, or 0.5% of global oil supply, as high gas prices force a switch from gas to oil consumption,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

He added that energy prices could rally from here if the Northern Hemisphere winter proved colder than expected.

China is in the grip of a power crunch as a shortage of coal supplies, tougher emissions standards and strong demand from manufacturers and industry have pushed coal prices to record highs and triggered widespread curbs on usage.

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.

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Crude Oil

Crude Oil Drops on Wednesday as U.S. Oil Inventories Jump Unexpectedly

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Global oil prices fell by 1 percent on Wednesday after data from the U.S. Energy Department showed that the United States oil inventories unexpectedly rose by 4.3 million barrels last week. More than the 1.9 million barrels predicted by experts.

The unexpected increase in United States inventories weighed on crude oil prices on Wednesday, erasing $1.31 or 1.5 percent from Brent crude oil after it rose to a seven-year high on Tuesday. While the U.S West Texas Intermediate (WTI) dipped by $1.09 or 1.3 percent to $83.56 a barrel.

Still, gasoline stocks declined by 2 million barrels across the United States, a situation likely to push pump prices even higher.

“The market continues to deplete Cushing crude oil inventories and that is impacting the Brent-WTI spread and ultimately we’re going to see crude oil diverted from the Permian up to Cushing rather than going to the Gulf Coast,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

However, the shaky COVID-19 recovery in most economies has led to doubts over the sustainability of rising oil prices.

“(Some) countries are falling into an autumn Covid-19 case spike,” said Louise Dickson, senior oil markets analyst at Rystad Energy, “which poses downside risk for oil demand growth in the very near-term and could provide a soft pressure on oil prices.”

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Brent Crude Oil Extends Gain to $86.66 a Barrel Amid Tight Supply

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Brent crude oil - Investors King

Tight global oil supply pushed Brent crude oil, against which Nigeria oil is priced, to a multi-year high of $86.66 per barrel on Monday at 3:30 pm Nigerian time.

Oil price was lifted by rising fuel demand in the United States and tight global supply as economies recover from pandemic-induced slumps.

The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Goldman Sachs on the other hand is predicting a further increase in Brent crude oil to $90 a barrel, citing a strong rebound in global oil demand due to switching from gas to oil. This the bank estimated may contribute about 1 million barrels per day to global oil demand.

The investment bank said it expects oil demand to reach around 100 million barrels per day as consumption in Asia increases after the devastating effect of COVID-19.

While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast,” Goldman said in a research note dated Oct. 24.

Earlier this month, the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ agreed to continue increasing oil supply by 400,000 bpd a month until April 2022 despite calls for an increase in global oil supplies.

The decision bolstered the price of Brent crude oil above $84 per barrel and expected to push the price even further to $90 a barrel. Low global oil supply amid rising demand for crude oil will continue to support oil prices in the near term.

Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production,” Goldman Sachs stated.

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Oil Falls Slightly as China Steps in to Curb Rising Coal Prices

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Global oil prices moderated slightly on Wednesday following the Chinese government’s decision to curb high coal prices and ensure coal mines function at maximum capacity.

Brent crude, against which Nigerian oil is priced, dropped to $83.98 per barrel at 11:00 am Nigerian time. While the U.S. West Texas Intermediate (WTI) crude fell by 80 cents or 1 percent to $81.20 a barrel.

“China is planning to take steps to combat the steep rises in the domestic coal market … which could put considerable pressure on the coal price there and reverse the fuel switch to oil,” Commerzbank said.

Prices for Chinese coal and other commodities slumped in early trade, which in turn pulled oil down from an uptick earlier in the day.

China’s National Development and Reform Commission said on Tuesday it would bring coal prices back to a reasonable range and crack down on any irregularities that disturb market order or malicious speculation on thermal coal futures. read more

Oil markets in general remain supported on the back of a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.

But the market on Wednesday was also pressured by data from the American Petroleum Institute industry group which showed U.S. crude stocks rose by 3.3 million barrels for the week ended Oct. 15, according to market sources.

That was well above nine analysts’ forecasts for a rise of 1.9 million barrels in crude stocks, in a Reuters poll.

However, U.S. gasoline and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, pointing to strong demand.

Data from the U.S. Energy Information Administration is due later on Wednesday.

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