Oil Price – Traders Are No Longer In Panic Mode To Find Buyers For Unwanted Oil As Demand Ticks Up



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Oil markets are returning to relative normality, the once yawning gap between the price of an actual physical barrel of oil and futures prices has narrowed sharply.

At its worst in April, a barrel of oil in the North Sea cost $10 less than the price on a Brent oil futures contract, a decade-high gap for the world’s benchmark oil price, according to S&P Global Platts. Now, the gap has shrunk to less than $2 a barrel as the oil market rebalances and traders are no longer in panic mode to find buyers for unwanted crude.

“A few weeks ago, we had armageddon pricing when nobody wanted physical barrels apart from for storage,” said Richard Fullarton, chief investment officer at hedge fund Matilda Capital Management Ltd.

The price of physical oil slipped far below futures prices last month when oil storage ran short and the cost to store crude jumped. The two prices tend to collide ahead of the expiration of futures contracts.

The return to health in the physical oil markets reflects several factors. Oil producers have made large, coordinated cuts in production. China’s economy has restarted and lockdowns in Europe and the U.S. eased, creating an uptick in demand. And a shortage of oil storage, which at one point drove U.S. oil futures prices into negative territory, appears to have peaked.

Oil prices, both physical and futures, have almost doubled since their April nadir, though they slipped Friday after China abandoned its yearly gross domestic product growth target.

Front-month futures for Brent crude, the global benchmark, fell 2.6% to $35.13 a barrel Friday, having rebounded from their $19.33-a-barrel low on April 21. Its physical counterpart was priced at $34.13 a barrel late Thursday.



Physical oil tends to be traded by major commodities trading houses, oil companies and refiners who have the financial heft and logistical capacity to store large amounts of oil in case they need to wait for a better pricing environment.

One of the largest independent traders, Trafigura Group Pte., has been on a buying spree. The Swiss company snapped up at least 15 cargoes of North Sea crude—amounting to 9 million barrels of oil—between May 13 and 21, according to S&P Global Platts. Trafigura declined to comment on its bet on North Sea crude, which was reported by Reuters.

Smaller traders also buy physical barrels of oil or refined products, for instance by filling fleets of tanker trucks with gasoline, selling it on to gas stations when prices move higher.

Overall, the gap between physical oil and futures was more pronounced in international markets than the U.S. As a largely seaborne crude, Brent producers could rush to store oil on massive tanker ships. Sellers of the largely landlocked U.S. benchmark, West Texas Intermediate, had to pay buyers to take it off their hands when futures prices turned negative on April 20.

Unlike Brent oil futures, which are all cash settled, some WTI futures contracts require their owners to take delivery of physical oil when the contracts settle. Even so, physical WTI at the end of March was $6 less a barrel than the futures market.



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That gap is now close to gone. The storage conditions were feared to be most acute in Cushing, Okla., where WTI contracts are settled.

“We didn’t see tank tops at Cushing. Instead we’ve seen phenomenal levels of shut-ins,” said Edward Marshall, a commodities trader at Global Risk Management, referring to the act of oil producers turning off wells to choke supply.

A pickup in refiner demand to supply Americans getting back on the road has helped WTI’s recovery. Pipeline flows from Cushing to Midwestern refiners are 400,000 barrels a day higher than they were in early April, according to commodity-market information provider Genscape.



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Stocks Surge As Oil Prices Rally

Stocks have their biggest gain in weeks as Wall Street is encouraged by a vaccine prospectvaccine prospect. Many of the world’s economies have begun to loosen restrictions on commerce, the Federal Reserve chair on Sunday signaled that the central bank has more firepower to lend to recovery efforts, and a drugmaker reported positive developments in an early trial of a coronavirus vaccine.



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Taken together, the developments set off a surge in global stock prices and Wall Street had its best day in about six weeks.

The S&P 500 rose more than 3 percent Monday, while stock benchmarks in Europe were 4 percent to 6 percent higher.

Before trading began in the United States, the drugmaker Moderna said its coronavirus vaccine showed promising early results in tests on humans. The early-stage tests were on just eight people, but the hope that a vaccine might be quickly developed was enough to give stock prices a lift.

Also bolstering markets was a pledge from Jerome H. Powell, the Fed chair, that there was “really no limit” to what the central bank could do with its emergency lending facilities.

“The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve,” Mr. Powell said during a television interview broadcast on Sunday.

The Fed chair also suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7 percent in April, could peak at 20 percent or even 25 percent.







Still, investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed its economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. Some restrictions have also been lifted in parts of Europe and the United States.

And trading on Monday had all the characteristics of a rally focused on the prospects for a return to normal. Shares of companies that stand to gain the most, like United Airlines, Expedia Group and Marriott International, were among the best performers in the S&P 500.

Businesses that have benefited as Americans stockpiled food and cleaning supplies, like Campbell Soup and Clorox, were among a small number of decliners.

Oil prices also reflected optimism about the economy, with West Texas Intermediate, the U.S. benchmark, rising above $30 a barrel for the first time since March. Shares of energy companies like Chevron and Exxon were also sharply higher.



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Oil Outlook Vastly Different Than When It Plunged Into Negative Territory A Month Ago

The fortunes of the oil market have turned around dramatically in the past month. This time last month, investors were watching the futures market in disbelief. The May contract for West Texas Intermediate oil was set to expire, and prices did the unthinkable — they plunged 300% in one day, deep into negative territory. In the spot market all across North America, prices also turned negative, meaning people literally couldn’t even give oil away.



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There were dire forecasts of much more pain ahead, and a recurrence of the wild trading was feared for the June contract. But now the outlook is much improved, as the June contract is set to expire Tuesday. The world has changed, and the ugly crisis created by both oversupply and a sudden lack of demand is beginning to reverse.

“We think fundamental right steps have been taken to get us on sounder footing,” said Helima Croft, head of global commodities strategy at RBC. Croft said the “green shoots of recovery in place,” as Chinese and U.S. demand are improving, and OPEC plus ended its feuding and agreed to sharply cut output.

China has been buying more oil, and its demand is clearly strengthening. U.S. drivers are getting back into their cars as coronavirus shutdown restrictions lift. On the supply side, Saudi Arabia last week added another 1 million barrels a day cut of its own to the OPEC plus deal for a 9.7 million barrel reduction, and America’s oil industry has cut its production quickly and sharply.

Oil prices jumped sharply Monday, rising on the positive developments and a rally in risk markets sparked by Fed Chairman Jerome Powell’s comments that the Fed will can do more to support markets and the economy. WTI futures for June were up 7.4% at $31.62 per barrel in afternoon trading.

Now, the demand side of the market and the supply side are improving in tandem, to reduce the oil glut that was close to filling all available storage facilities, including ships at sea. The fact that the world was running out of places to store oil in April was behind the sharp drop in the futures contract. Investors were unable or unwilling to take delivery of oil, and there were also investors who became trapped in the trade as the selling spiraled. Interactive Brokers took a $109.3 million hit to cover its customers’ losses.

Oil is now trading above $30 for the first time since March 17, and RBOB gasoline futures have risen above $1 per gallon for the first time since March 13. The strong move higher in the June contract is also forcing some investors to cover short positions, adding to the rise.







The United States Oil Fund ETF, based on futures contracts, was up more than 8% Monday. Some investors initially blamed USO for causing the market disruption last month, but the fund had already rolled out of the May contract before the market began to crater. A popular oil play for retail investors, USO has since restructured its holdings to distribute them more evenly across later dated contracts, rather than holding them in the front month.

As the June contract gets set to expire, the landscape has changed dramatically for the U.S. oil industry. U.S. production was at a record high in March, and has cut back by 1.5 million barrels a day in just about six weeks, to 11.6 million barrels a day, according to the Energy Information Administration’s latest weekly data. Analysts expect production could be down by another 500,000 to 1 million barrels soon.

“It’s just a massive response by the U.S. industry,” said John Kilduff, partner with Again Capital. “This is a remarkable plunge in activity. … It’s pretty clear the U.S. is now the swing producer.”

Baker Hughes reported that another 34 oil rigs went out of service last week, leaving just 258 active oil rigs, about a third of the rig count last year.

“Storage at Cushing actually fell last week. That was the whole mechanism last month that drove the negative pricing,” said Kilduff. “There were barrels to take in and no place to put them.” Cushing, Oklahoma is the storage hub for WTI, so the market watches storage levels there closely.

“The pace was such that it would have been topped out by the end of June,” Kilduff said, but that seems to have reversed. Traders said oil prices were also lifted Monday by a report from Genscape that showed another big drop in Cushing storage levels. Government data on the latest storage levels will be released Wednesday.

The weekly U.S. government data shows implied demand for gasoline was also up sharply, with demand at 7.4 million barrels a day, from the early April trough of 5.1 million barrels a day. Normal demand for this time of year is about 9.5 million barrels a day, and it peaks ahead of the July 4 holiday. Analysts said the government data overstates retail demand, which is more like 6.5 million barrels a day in mid-May.

Analysts say demand has improved and as of last week, it was off by about 30% from normal levels, much better than the approximately 50% drop in demand in early April. U.S. gasoline demand is key because it is typically equal to about 10% of global oil demand.

Francisco Blanch, head of global commodities and derivatives at Bank of America, said he expects the rally to continue for now, but prices will not go that much higher. “This is a recovery that has a pretty low ceiling. My sense is that if prices approach $40 a barrel, then production will come back pretty quickly,” he said.

Oil prices were also helped Thursday by a news report that Chinese demand has returned to levels near where it was before the lockdown there.

RBC has been tracking Chinese data, including on airline flights, and it expects demand will recover an average 9% this quarter, 17% in the third quarter and 25% in the fourth quarter from the lows seen during the first quarter. Croft expects the recovery in China to be the quickest, relative to other global regions.



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Oil Prices Boosted By Saudi Arabia Pledge To Deepen Output Cut

Oil futures rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June in a bid to help drain the glut in the global market that has built up as the coronavirus pandemic crushed fuel demand.

Brent crude (LCOc1) futures advanced 0.5%, or 15 cents, to $29.78 at 0500 GMT, after hitting an intraday high of $30.11 a barrel.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were up 1%, or 26 cents, at $24.40 after touching an intraday high of $24.77.


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Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” Stephen Innes, chief global market strategist at AxiCorp, said in a note. OPEC+ is a group comprised of members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia.

The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total. Kazakhstan has also ordered producers in large and mid-sized oil fields including Tengiz and Kashagan to cut oil output by around 22% in the May to June period.

Still, the moves to deepen cuts raised questions for some about why the further cuts were needed.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?'” said Vivek Dhar, Commonwealth Bank’s mining and energy economist.



The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.

However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of COVID-19 cases spurring renewed lockdowns.

Data showing China’s April factory prices fell at the sharpest rate in four years also added to investor jitters as it revealed weak industrial demand.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” said Commonwealth Bank’s Dhar.

Inventory data this week will be key to extending the recent rally in oil prices, analysts said.


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U.S. crude inventories likely rose by about 4.3 million barrels in the week to May 8, a preliminary Reuters poll showed, ahead of reports from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday.



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The World Is Running Out Of Room For Its Oil

Lockdown measures are crippling demand, and supply isn’t falling quickly enough to keep up. Oil-storage tanks around the world are rapidly filling with crude, leaving the new production coming out of the ground with nowhere to go.

The overwhelming glut is threatening one of the world’s vital industries and could prolong the economic fallout from the coronavirus. As storage filled, one price for U.S. crude recently fell below $0 a barrel—a first in oil-market history—effectively meaning sellers would have to pay buyers to take barrels off their hands.

Even with a recent rebound as parts of the world reopen for business, oil trades at a fraction of where it started the year. U.S. crude futures closed down 1.8% at $23.55 a barrel Thursday, extending a streak of wild moves by erasing an earlier 11% rally. Most energy companies would lose money producing at these levels.


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Stockpile data are incomplete or delayed, but recent figures already illustrate the crisis. Global oil inventories fall into two main categories: commercial stockpiles and strategic reserves held for emergencies. Most investors focus on changes in commercial inventories because those are most sensitive to shifts in global supply and demand.

Producers and traders who don’t want to sell crude at today’s low prices can try to store it in hubs around the world, then sell in the future. The problem now is that demand for storage space is skyrocketing.

U.S. commercial stockpiles are rising at their quickest pace ever in government data going back to 1982. At 532.2 million barrels during the week ended May 1, inventories are soon expected to blow past a record of 535.5 million barrels set in March 2017.

The increase has been pronounced in Cushing, Okla., a key hub. Analysts said dwindling storage space in Cushing contributed to the recent drop in one futures contract below $0 a barrel. On April 20, that futures contract was close to its expiration date—meaning traders had to either sell it or accept delivery of actual barrels of oil at Cushing by the following month.


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Those stuck holding the contracts likely couldn’t find available storage for oil and began paying others to take the contracts from them.

It is hard to know how much space is actually available. Logistical hurdles mean storage tanks can’t be filled to the brim, and competition for remaining space is fierce. That means much of the remaining empty room could have already been claimed for future use. Even so, the official Energy Information Administration figures show Cushing inventories rising at a pace that would have them completely full in weeks.

As a result, crude-futures prices recently traded around their lowest levels in two decades.

Normally, when oil prices slide, consumers travel more, limiting the price drop and eventually spurring a rebound. But with much of the world practicing social distancing, fuel consumption has plummeted.

That means companies industrywide are struggling. Refiners such as Marathon Petroleum Corp. and Valero Energy Corp. that take in oil and turn it into petroleum products including gasoline are bringing in much less crude. The extra crude must find a home in storage.

In addition to Cushing, other U.S. storage hubs are located in the Gulf Coast. A flood of oil from Saudi Arabia, the world’s largest exporter, is starting to arrive in the region—fallout from a March production feud between the kingdom and Russia that raised global supplies even as demand crashed.

That extra crude could make the glut in the U.S. even worse. Oil normally moves seamlessly through a network of pipelines and storage hubs across the country, but more of it will have nowhere to go.

The excess oil is forcing energy companies to curb spending and shut in productive wells. Some companies are starting to go bankrupt and lay off employees. The turmoil is erasing hundreds of billions of dollars from the sector’s market value.


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There is also a large amount of oil floating at sea with nowhere to go, according to cargo tracker Kpler. Some ships have even been crowding off the California coast recently.

Oil-market analysts are also watching inventories overseas, particularly in China, the world’s largest commodity consumer. Figures from analytics company Kayrros show a rise in those stockpiles recently, too.

And with supply projected to continue exceeding demand for now, many analysts expect prices to remain volatile.




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Crude Oil Volatile – Dysfunction In The Oil Market Intensified, Sending The Most Popularly Traded U.S. Oil Contract To A Fresh Low

Oil prices recovered some losses Tuesday after traders scrambled to avoid the worst of the damage wrought by volatile markets. The world is awash with too much oil at a time when coronavirus lockdowns on driving, flying and industrial activity has all but eliminated the need for the stuff.


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June futures contracts for West Texas Intermediate—the main U.S. bellwether—dropped nearly 20% and touched $10.24 a barrel before regaining ground to around $13.56 a barrel, up 6% on the day. Brent crude was up 2.9% at $23.72 a barrel. WTI traded at a massive difference to its European counterpart because of severe bottlenecks in storing oil in Cushing, Okla., where WTI contracts are settled.

The earlier drop in WTI briefly put it on track for the lowest closing level for an actively traded contract since at least 1986, according to data provider FactSet. WTI has only ever settled the day below $11 on six occasions, according to FactSet records, which stretch back to 1986. The last time was in 1998. The all-time low was March 31, 1986, when oil traded for $10.42.

A lightly traded futures contract for WTI traded for negative prices last week, spooking markets, and prompting investors to race out of contracts that require them to take delivery of oil in the coming months. Most oil watchers consider the most actively traded contract at any given time as the price that best reflects market conditions.

The selloff picked up steam Tuesday as investors sold the June contract and into ones that are tied to oil delivered in months down the road, said Giovanni Staunovo, commodity analyst at UBS’s Chief Investment Office.

“Everyone’s running out of the contract and they don’t want to be the last ones on the train, so that’s not helping prices,” Mr. Staunovo said.

S&P Dow Jones Indices said in a statement after Monday’s market close that it would remove the June U.S. crude contract during Tuesday trading hours from its widely followed indexes that track the oil market and switch to the July contract.

The move, which S&P said would include the S&P Goldman Sachs Com modity Index, comes earlier in the trading month than usual, and was “based on the potential for the June 2020 WTI Crude Oil contract to price at or below zero,” the index announcement said. BlackRock’s iShares S&P GSCI Commodity-Indexed Trust exchange-traded fund tracks that index and had around $400 million of assets as of April 27, according to the fund website.

BlackRock didn’t immediately respond to a request for comment.

That followed a decision by the United States Oil Fund —the largest exchange-traded fund that attempts to track oil prices—to sell its positions in the June contract and purchase positions in contracts several months away.

The crash in prices, and the dip into negative territory for the May contract last week, highlighted the dangers associated with holding oil futures that expire soon. Some WTI contracts require owners to take delivery of oil when the contracts expire. With oil tanks and pipelines full, some oil investors were forced to unload the right to collect that oil and pay the buyer to do so.



Many fear that negative oil prices could happen again. Prices on WTI contracts for July delivery have also come down in recent days to $18.99 a barrel. Contracts for delivery at the end of the year are at about $27 a barrel.

Government-imposed lockdowns aimed at preventing the spread of the coronavirus have suffocated global oil demand. Oil majors, frackers and national oil companies around the world have raced to shut off wells. A deal among major oil-producing nations to cut due to take effect Friday that will hold back approximately 13% of global supply.

But investors worry these measures won’t relieve the supply glut fast enough.

A lack of space to store oil onshore in the largely landlocked U.S. market has pushed WTI prices lower, said Bjarne Schieldrop, chief commodities analyst at SEB Markets. The hit to Brent prices, which are tied to oil produced in the North Sea, has been less severe. The Brent market is largely seaborne and space to store oil offshore remains. But as long as production continues amid weakening demand, space will run out, Mr. Schieldrop added.

“The final crunch point in time is still ahead of us,” he said. “Supply and demand will be forced to align meaning that production will have to shut down. That will be the final low point, but we are not there yet.”

Investors will keep a close watch on U.S. inventory data due out this week, with American Petroleum Institute stock-level data expected later Tuesday.




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Oil Glut Swells Off Asian Trading Hub On Global Storage Scramble

A narrow waterway off Singapore has become even more congested as oil-laden tankers wait out a slump in global fuel consumption that’s crimped demand and boosted the use of ships to store cargoes.

About 60 clean fuel tankers are currently anchored along the busy strait, up from the usual 30-40 ships, according to Rahul Kapoor, head of commodity analytics and research at IHS Markit. Some vessels are being used to hoard fuel at sea as onshore tanks fill up. Others are probably parked, waiting to be redirected to any willing buyer across Asia and the world as the coronavirus pummels economies worldwide.



Ships filled with gasoline to jet fuel are moving from major refinery hubs such as South Korea and China due to a crash in domestic demand and swelling stockpiles. These tankers are finding their way to the Singapore Strait, where the glut is being compounded by offloading delays at the city state. Vessels currently have to wait about two weeks to discharge cargoes in Singapore, compared to the typical 4-5 days, according to shipbrokers and traders, leaving ships stranded in local waters.

Storage options are dwindling globally as onshore tanks rapidly fill to capacity, prompting traders, refiners and infrastructure companies to seek alternatives such as pipelines and ships. Bloomberg earlier reported that those who managed to snag some highly-coveted tanks in Singapore were being charged much higher rates, even as the nation stopped leasing out space to new customers.

Major fuel-exporting countries are facing difficulties finding homes for their surplus barrels,” said Sri Paravaikkarasu, Asia oil head at industry consultant FGE. In Singapore, crude processing rates at refineries have probably dropped to around 60% of capacity, and may drop further to as low as 50% during the second quarter, she said.

The onshore storage squeeze is being seen across the region. In India, tanks were 95% full as of last week as refiners scrambled to find space to hold their excess fuel, even turning to pump stations and depots. In Singapore, fuel stockpiles rose to a four-year high in mid-April.


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Utilizing tankers has become the next best option, with analytics firm Vortexa estimating floating crude oil storage in Asia at a four-year high. Taking into account the waters off Singapore as well as Malaysia, data intelligence firm Kpler saw a 45% month-on-month increase in the volume of clean fuels — comprising naphtha, gasoline, jet fuel and diesel — stored on ships to 6.64 million barrels as of April 23.

Across the world, freight rates for both clean as well as dirty tankers have surged dramatically along with rising demand for floating storage. Also, shippers are using a strategy known as slow steaming, where they deliberately reduce the speed of tankers to increase the shipments’ transit time while awaiting the emergence of buying interest from customers, or save on fuel.




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Oil Prices Soar As Traders Prepare for Wild Ride to Continue

West Texas Intermediate futures that will deliver oil in June, the U.S. benchmark, rose 20% to $16.47 a barrel. Brent crude futures, used to set prices for oil throughout global energy markets, rose 8.6% to $22.12 a barrel.

Helping prices regain some lost ground: signs of a recovery in demand for oil in China, which is emerging from coronavirus lockdowns, and tensions between the U.S. and Iran. The two nations engaged in a new round of antagonism Wednesday, when Tehran said it had launched its first military satellite into space.

“When you look at China, road traffic and refinery operations are back up,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “Don’t forget the geopolitical side too,” he added, referring to the potential for U.S.-Iranian tensions to disrupt the movement of oil through the Strait of Hormuz, a vital channel for tankers.

The advance in prices Thursday continues a period of outsize moves in global energy markets, which have rippled through to oil producers, bond markets and currencies. The price of the most actively traded WTI futures contract has moved up or down 10%, on average, on each trading day since the start of March.

That compares with an average move in either direction of 1.5% in 2019 as a whole, according to FactSet data.


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Traders and analysts say prices will continue to swing. One gauge of how volatile WTI futures prices are expected to be over the next 30 days, the Cboe Crude Oil ETF Volatility Index, has soared more than 730% this year to its highest level on record.

Like the better-known VIX index tracking volatility in the stock market, the index uses options prices to calculate how far traders are expecting prices to move over the next month.

The oil volatility options aren’t tied to oil futures prices directly but instead to United States Oil Fund LP, an exchange-traded fund that aims to match U.S. crude prices. The fund has been at the center of the oil price drama in recent days. It accumulated a huge position in the futures market thanks to a rush of cash from individual investors.

The pandemic has stopped the world from consuming tens of millions of barrels of oil it would otherwise use every day, and storage space is filling up. Production cuts by the Organization of the Petroleum Exporting Countries and its allies, led by Russia, won’t immediately offset this decline in demand.

U.S. crude prices remain 41% lower than they were at the end of last week. In an aberration of historic proportions, the lightly traded May WTI futures contracts fell below $0 for the first time on Monday, meaning traders had to pay buyers to take oil off their hands.

“We’re close to capitulation,” said Marwan Younes, chief investment officer at Massar Capital Management. “We’re getting close to the point when people just stop trying to buy this,” he added, referring to U.S. crude oil futures.

Crude-oil stockpiles in the U.S. climbed by 15 million barrels to 518.6 million barrels last week, the Energy Information Administration said Wednesday, putting them about 9% above the five-year average. Production fell by a modest 100,000 barrels a day.



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Global Stocks Steady As Oil Prices Recover

Global stocks were little changed as oil prices regained more ground after days of turmoil.


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Futures for the S&P 500 were flat, suggesting moves in U.S. stocks later Thursday could be muted. The pan-continental Stoxx Europe 600 fell flat. Major benchmarks in the Asia-Pacific region were mixed: Japan’s Nikkei 225 closed 1.5% higher, while indexes in Australia and Shanghai showed little change. Hong Kong’s benchmark gained 0.5%.

The yield on the 10-year Treasury note rose slightly to 0.622% from 0.618% in the previous session. Yields fall as bond prices rise.

Oil prices built on Wednesday’s rebound, which was sparked by the prospect of fresh U.S.-Iran tension. Strains in the Middle East can boost crude prices by signaling potential disruptions to shipments of oil around the world and possible supply shortages.

U.S. crude-oil futures for June delivery advanced 6.9% to $14.71 a barrel. Brent crude, the global equivalent, rose 5.3% to $21.45 a barrel.

Eli Lee, head of investment strategy at Bank of Singapore, said markets had been buoyed by hopes that economies could quickly get back to normal as the coronavirus pandemic came under control, and by hefty support from the Federal Reserve, even extending to riskier assets like lower-rated bonds.



However, Mr. Lee said: “The path towards normality is going to be very gradual.”

History tells us that the market correction during prolonged recessions of more than one year tends to be far deeper” than seen so far, he added.

Fresh coronavirus outbreaks in Asia have added to uncertainty about how quickly governments can safely resume normal economic activity. In the U.S., President Trump said Wednesday that he strongly disagreed with the governor of Georgia’s decision to allow some nonessential businesses to reopen as soon as Friday, saying this was too soon.

Frank Benzimra, head of Asia equity strategy at Société Générale, said China offered a template for economies reopening. “Even if things are getting back slowly to normal, the borders aren’t open, so free circulation of goods and trade isn’t coming back quickly.”

The Dow Jones Industrial Average clawed back some of this week’s losses Wednesday, gaining 2% as oil prices rose and investors looked to corporate-earnings reports to gauge the health of U.S. businesses during the coronavirus pandemic.



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Oil Collapse Continues As Brent Plunges More Than 15%

Oil prices continued to plummet Wednesday as concerns over limp demand and limited remaining storage capacity lingered.

In the afternoon of Asian trading hours, international benchmark Brent crude futures dropped 15.57% to $16.32 per barrel. Meanwhile, the June contract for West Texas Intermediate shed all of its earlier gains as it dropped 6.66% to $10.80 per barrel. The July contract for WTI also declined and was last trading below $19 per barrel.

Per Magnus Nysveen, senior partner and head of analysis at Rystad Energy, warned that the situation in the oil markets is “going to be worse.”

“The world is running out of place to store the oil,” Nysveen told CNBC’s “Street Signs Asia” on Wednesday, adding that storage acts as “a kind of buffer.”

“When the supply and demand balance is positive or negative, then you can build or draw from storage,” he said. “But when the storage gets full, then there is no buffer for this very strong imbalance that we’re seeing.”



Pictet Wealth Management’s Jean-Pierre Durante agreed with Nysveen’s assessment of the situation, commenting in a Wednesday note that the “world is overflowing in oil” despite a recent decision by the Organization of the Petroleum Exporting Countries and its allies — known collectively as OPEC+ — to cut oil supply.

“World storage capacity will rapidly reach saturation point,” said Durante, who is head of applied research at Pictet Wealth Management.

Global demand for oil has fallen dramatically, with major economies worldwide effectively frozen as a result of coronavirus-induced lockdowns imposed by authorities scrambling to contain the spread of the disease.

Wednesday’s moves in oil followed recent sharp declines in the sector. The May contract for WTI, which expired Tuesday, plunged below zero for the first in history before clawing its way back into positive territory. The June WTI contract plunged more than 40% on Tuesday while international benchmark Brent dropped from levels above $24 per barrel.



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US Oil Fund Plunges 38%, Halted For Trading Repeatedly

Trading in the United States Oil Fund, a popular exchange-traded security known for its ‘USO’ ticker which is supposed to track the price of oil and is popular with retail investors, plunged nearly 40%.

At one point, trading was halted in morning trading after USCF, the manager of the fund, said that it was temporarily suspending the issuance of so-called creation baskets. It was then halted periodically during the trading day for volatility.


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Creation baskets are how an ETF creates new shares to meet demand. The baskets hold the underlying securities which in this case are plummeting oil futures. With the halting of these creation baskets, the ETF will essentially now trade with a fixed number of shares like a closed-end mutual fund.

On Friday, USCF changed the structure of the USO fund so that it can hold longer-dated contracts. Per a regulatory filing, around 80% of the fund will be in the front-month contract, with 20% in the second-month contract.

John Davi, founder and CIO of Astoria Portfolio Advisors, said the new structure was implemented as a way to try and protect investors from plunging crude prices. The coronavirus pandemic continues to sap worldwide demand for crude, which has sent prices to their lowest levels on record.

According to Davi, the USO is primarily owned by retail investors, which can be dangerous for those who believe they are betting on oil prices moving higher over time, without fully understanding the dynamics in the commodity market.

“To buy USO you have to understand the oil futures market,” Davi told CNBC. “They [retail investors] just buy the ETF because they think the price of crude will go up, but they don’t understand the drivers, which are fairly complicated.”

USCF did not provide a comment.

On Monday, the May contract for oil fell to a negative price, an unprecedented event wreaking havoc on the oil markets. The contract expires today. USO likely had already sold that contract because it has stated in the past that it would invest in the next contract two weeks before expiration. So it owns futures for the June month and now likely the July month, given the revised structure.

June futures began cratering as well on Tuesday, pressuring the fund. June futures expiring in a month dropped 50% to under $10 on Tuesday. July contracts fell 27%. The May contract, however, recovered a bit and was trading with a positive value again of $9.

USO could run into trouble if those contracts also fall to a negative value as they near expiration, mimicking the May contract’s plunge ahead of its expiration.

Negative futures value is unprecedented and it is unclear how products like exchange-traded funds built for the retail investor to participate in the market will handle such events.

Hayman Capital Management CIO Kyle Bass has been warning investors about the danger of exchange traded funds that track oil prices.

“Retail has been plowing into these oil contracts thinking they’re buying spot crude oil when they’re buying the next front month. So they’re paying $22 a barrel when the spot market’s negative $38. Retail investors are going to get fleeced if they continue to fly into these oil ETFs,” he said Monday on CNBC’s “Closing Bell.”

Following Monday’s price action, Bass, who said he holds short positions against some energy-focused ETFs, tweeted that he would demand 100% collateral.

Warren Pies, energy strategist at Ned Davis Research, sounded a similarly cautious tone.

“At best, they are expensive ways to gain programmatic futures exposure,” he said of commodity-based ETFs on Monday. “At worst, they are designed to implode. Still, money continues to flow into the USO ETF. As of last week, USO’s assets reached an all-time high of more than $5 billion. To reiterate: In this environment, USO is a train wreck. Stay away,” he said.



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Oil-Price Crash Deepens, Weighs On Global Markets

The crash in global oil prices deepened Tuesday, as pain spread to currencies of major exporters and shares in energy producers.

Brent crude futures, the international benchmark for oil markets, dropped 15% to $20.67 a barrel, their lowest level since 2002. The decline came a day after the price of West Texas Intermediate, the U.S. crude benchmark, dropped below zero for the first time in history.

U.S. oil markets came under further pressure. The June WTI futures contract, now the most actively traded, dropped 17% to $17.03 a barrel. The May contract, which settled at a historic minus $37.63 a barrel Monday, rose to minus $6.30 a barrel in thin volumes on its final day of trading.

The convulsions in oil markets underlined the huge hit that government-imposed lockdowns designed to stall the spread of the coronavirus have dealt to oil demand. With producers unable to shut wells fast enough, and OPEC and G-20 production cuts not due to take effect until early May, traders say that the world is essentially running out of space to store oil.

“Whatever oil analysts and oil traders have learned over the course of the last 50 years or 100 years was all of a sudden put in question” by Monday’s negative oil prices, said Eugen Weinberg, head of commodities research at Commerzbank. “Everyone has been shocked.”

Oil futures, used by investors to bet on the direction of prices and by producers to protect against market swings, had performed better than the physical oil market for several weeks. Now, they are being stung by the slide in demand for actual barrels of crude.

“This is the market signaling to producers that you need to cut off more production faster because we’re drowning in oil at this point,” said Saad Rahim, chief economist at Swiss commodities trader Trafigura.

The drop in oil prices rippled through to the currencies of oil-producing nations. Russia’s ruble dropped 1.7% to trade at 76.81 a dollar, extending its depreciation against the greenback this year to 19%.

The economy of Russia, the world’s second-largest oil producer in 2019, stands to suffer from lower oil prices. A weak currency could prevent the Bank of Russia from cutting interest rates as much as it would like to bolster growth at a monetary-policy meeting on Friday, said Piotr Matys, a strategist at Rabobank.

U.S. stock futures and European equity markets were down Tuesday, led lower by shares in energy companies. Shares in Noble Energy Inc. fell more than 5% in New York in premarket trading, as did shares in oil-field services provider Schlumberger Ltd. Among Europe’s oil majors, BP PLC lost 4.6%, Royal Dutch Shell PLC 4.5% and Total SA 3.5%.



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The underlying problem for energy markets remains the collapse in demand caused by the coronavirus, which has grounded planes, stopped billions of people from driving and disrupted global trade. Economists have forecast a deep global recession and international oil organizations estimate that demand will shrink in the coming weeks.

“We’re running out of storage,” said Bob McNally, president of consulting firm Rapidan Energy. “Demand is contracting two or three times as fast as supply.” The drop in prices is a “brutal but efficient” mechanism to “persuade producers to keep oil under the crust,” Mr. McNally said.

The drop below zero makes it more likely that President Trump will impose tariffs on oil imports into the U.S., added Mr. McNally, a former White House adviser.

Market mechanisms that might help rectify the slump appear to be breaking down because of the lack of storage space and demand for oil globally.

Typically, low U.S. prices would encourage traders to buy cheap American oil and sell it at a higher price in Europe or Asia. The way Brent crude prices sank in tandem with WTI on Tuesday suggests “the world doesn’t want to take U.S. barrels,” said Vincent Elbhar, co-founder of Swiss hedge fund GZC Investment Management.

Monday’s moves also prompted urgent discussions between Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries about whether to cut production as soon as possible. OPEC members are considering bringing forward the start date for production cuts from May 1.



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U.S. Crude Futures Turn Positive After Historic Plunge

U.S. oil prices hobbled back into positive territory on Tuesday after sinking below $0 for the first time ever, but international benchmark Brent dipped as the global coronavirus crisis severely reduces demand for crude.

U.S. West Texas Intermediate (WTI) crude for May delivery (CLc1) was up $38.99 in thin trade at $1.36 a barrel by 0622 GMT after settling down at a discount of $37.63 a barrel in the previous session. The May contract expires on Tuesday and the more-active June contract rose 94 cents, or 4.6%, to $21.37 a barrel.



Global benchmark Brent crude for June delivery was down 48 cents, or 1.9%, at $25.09 per barrel.

“Demand destruction from COVID-19 will see a slower than expected reopening of the U.S. economy,” said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices. “The WTI crude June contract was able to hold the $20 a barrel level and is seeing a modest gain following the painful rollover of the May contract.”

Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30% worldwide. That has resulted in growing crude stockpiles with storage space becoming harder to find.

The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks.

Following the collapse in oil prices, U.S. President Donald Trump said on Monday that his administration was considering halting Saudi crude oil imports as a way to help the U.S. drilling industry.

Today it’s pretty clear that a major issue in the market is a glut in the United States and lack of storage capacity,” said Michael McCarthy, chief market strategist, CMC Markets in Sydney.

Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd). But that will not take place before May, and the size of the cut is not viewed as big enough to restore market balance.

Supply and inventories are expected to tighten in the second half of the year, while “severe storage distress is likely to drive wild price realizations,” in the next 4-6 weeks, Citi Research said in a note.

Meanwhile, U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, according to five analysts polled by Reuters. Analysts expected gasoline stocks to rise by 3.7 million barrels last week.

The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday, and the weekly report by the U.S. Energy Information Administration is due at 10:30 a.m. on Wednesday.



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Oil Falls More Than 10% To Lows Not Seen Since 1999

Crude oil futures fell on Monday, with U.S. futures touching levels not seen since 1999, extending weakness on the back of sliding demand and concerns that U.S. storage facilities will soon fill to the brim amid the coronavirus pandemic.

The oil market has been under pressure due to a spate of reports on weak fuel consumption and grim forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency.


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The volume of oil held in U.S. storage, especially at Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is rising as refiners throttle back activity due to slumping demand.

The front-month May WTI contract (CLc1) was down $2.62, or 14%, to $15.65 a barrel by 0142GMT. At one point, the contract had fallen as much as 21% to hit a low of $14.47 a barrel, the lowest since March 1999.

That contract is expiring on Tuesday, and the June contract , which is becoming more actively traded, fell $1.28, or 5.1%, to $23.75 a barrel. Brent (LCOc1) was also weaker, down 21 cents, or 0.8%, to $27.87 a barrel.

The plunge in crude oil prices reflects a glut at the main U.S. storage facilities at Cushing and a big drop in demand, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“It hasn’t reach capacity but the fear is that it will,” he said, adding that once the maximum capacity is reached, producers will have to cut output.

Production cuts from OPEC and its allies such as Russia will also kick from May. The group has agreed to reduce output by 9.7 million bpd to stem a growing supply glut after stay-at-home orders and business furloughs to curb the COVID-19 pandemic that has killed more than 164,000 people worldwide sap fuel demand.

The oil industry has been swiftly reducing production in the face of an estimated 30% decline in fuel demand worldwide. Saudi Arabian officials have forecast that total global supply cuts from oil producers could amount to nearly 20 million bpd, but that includes voluntary cuts from nations like the United States and Canada, which cannot simply turn on or off production in the same way as most OPEC nations.

Numerous majors have announced supply reductions, including Chevron Corp (NYSE:CVX), BP plc (LON:BP) and Total SA (PA:TOTF). But economic growth is sagging, and physical crude markets and an estimated record 160 million barrels of oil stored onboard ships suggest prices will keep falling.

“There’s still some concern that the 10 million barrels per day cut won’t be enough to offset demand destruction so the outlook for oil prices remain subdued,” McCarthy said.

North American exploration and production companies have cut their budgets by roughly 36% on a year-over-year basis, according to a Sunday note from James West, analyst at Evercore ISI, while international companies have cut budgets by 23%.



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Oil Market – Record Cuts In Oil Output

The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact.

As part of the agreement, 23 countries committed to withhold collectively 9.7 million barrels a day of oil from global markets. The deal, designed to address a mounting oil glut resulting from the pandemic’s erosion of demand, seeks to withhold a record amount of crude from markets—over 13% of world production. The U.S. has never been so active in forging a pact like this.


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On a hastily convened conference call with delegates from the 13-nation Organization of the Petroleum Exporting Countries and others, including Russia, participants raced to strike a deal before oil markets opened Monday. They expected prices to crash without an accord.

It was a diplomatic victory for Mr. Trump. His allies in the oil industry prodded him to press international rivals to cut supply before it caused a wave of U.S. bankruptcies.

Mr. Trump, on Twitter, said the deal will “save hundreds of thousands of energy jobs in the United States,” and he thanked the Russian and Saudi Arabian leaders for their cooperation.

Mr. Trump and his representatives weren’t present at Sunday’s meeting. Still, the American president’s presence loomed large, after calling the Saudi leadership and Mexican President Andrés Manuel López Obrador over recent days. Mr. Trump also placed phone calls last month urging the Saudi and Russian leaders to call a cease-fire in their price war against each other.

Christi Craddick, a regulator with the Texas Railroad Commission—which regulates oil in the U.S.’s largest oil-producing state—said Mr. Trump’s “aggressive actions and continued engagement to bring Saudi Arabia and Russia to the table to reduce global oil production was crucial to defending the domestic energy industry” and avoiding a downward spiral in oil prices.

Investors remain concerned that the cuts might not be enough to support higher prices in the coming weeks as world-wide lockdowns pummel demand for gasoline, diesel and jet fuel.

The curbs will mitigate some issues in oil markets, but some analysts said they were too little, too late. Amid travel restrictions and work stoppages, oil consumption is expected to fall by as much as 30 million barrels a day this month.

Under the final deal disclosed Sunday, Mexico will cut 100,000 barrels a day of output, some 250,000 barrels fewer than Saudi Arabia initially wanted. The U.S. unlocked the standoff by pledging to compensate for the Mexican amount with 300,000 barrels of reductions of its own, the delegates were told.

It couldn’t be determined whether that was in addition to other U.S. cuts, or how the U.S. cuts would be implemented.

In the end, Saudi Arabia, Russia and their other oil allies expected to bear the brunt of the work rebalancing the historic glut.


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The U.S., Canada, Brazil and the other Group of 20 leading economies that aren’t part of the OPEC alliance will hold back four million to five million barrels a day, OPEC said in a draft press release.

Canada wasn’t asked to impose production cuts on its oil producers, said Sonya Savage, energy minister for Alberta, Canada’s largest oil-producing province. Instead, the decrease will come through market forces, as companies tend to cut production voluntarily when prices drop, she said.

In addition, Saudi Arabia, the United Arab Emirates and Kuwait have agreed to cut a combined two million barrels a day above their quota, Iranian Oil Minister Bijan Zanganeh said in a televised interview.

Industrialized nations that are part of the International Energy Agency are set to announce crude purchases to fill their national inventories as a way to take some surplus oil off the market, according to people familiar with the matter.

Overall, the measures, combined with existing sanctions on Iran and Venezuela and outages in hot spots such as Libya, could withhold 20 million barrels a day of supplies from the market, OPEC said in the draft press release.

The American Petroleum Institute, the largest oil and gas trade group in the U.S., commended a deal to “reduce supply to align with lower energy demand as result of the pandemic.”

Without the deal, the global oil industry would have run out of storage over the next few weeks, and prices would have crashed and hit financial markets, said Daniel Yergin, vice chairman of IHS Markit. “This restrains the buildup of inventories, which will reduce the pressure on prices when normality returns,” he said.

Oil prices are down 40% since early March, when Saudi Arabia and Russia failed to agree on an emergency plan to address the supply glut. After the disagreement, Saudi Arabia embarked on an aggressive price war in an attempt to grab market share from Russia, a key rival.

The international deal had stalled three times in recent days, with scheduled votes canceled and ministers repeatedly dismissed and called back, a senior White House official said.

Tensions grew inside the White House on Sunday afternoon after a fourth vote didn’t start at the scheduled time. Several officials believed it was the last chance for a deal. Mr. Trump grew concerned and made another round of calls to keep leaders at the negotiating table, the White House official said.

For decades, Mr. Trump has been a vociferous opponent of the cartel, deeming its efforts an evil force that squeezed American motorists. But the Saudi-Russia price war‘s threat to the U.S. oil industry led to what seemed to be a change of heart.

In addition to prodding both sides, the U.S. has also warned it would retaliate if Saudi Arabia didn’t turn off the spigots. On April 4, Mr. Trump threatened to impose tariffs on crude imports if he has to protect U.S. energy workers from an oil flood from producers such as Saudi Arabia.

Some Republican senators spoke with the Saudi energy minister for nearly two hours Saturday, warning him a longstanding U.S. alliance with the kingdom would be damaged if he didn’t cut output. “The Saudis spent over a month waging war on American oil producers, all while our troops protected theirs. That’s not how friends treat friends,” Sen. Kevin Cramer, a North Dakota Republican, said.

On Sunday, Mr. Cramer said he would monitor the deal’s implementation. “We have to make sure these countries hold up their end of the deal, and we will be watching every step of the way,” he said.

The deadlock between Mexico and Saudi Arabia proved to be a test for Prince Abdulaziz bin Salman’s uncompromising leadership style, delegates said, as the Saudi energy minister struggled to corral nations into a deal.

At the OPEC-led meeting on Thursday, Prince Abdulaziz appeared to have reached a collective deal when he rebuked a demand by Rocío Nahle, the energy minister of Mexico, to soften production curbs. “He was inflexible,” said a delegate. The prince wanted OPEC to act as a unified group. He has said he believes any exemptions to oil production cuts would bring about a total collapse of the oil market.

Prince Abdulaziz, the son of the Saudi king and half-brother to the designated heir to the Saudi throne, Crown Prince Mohammed bin Salman, was the first royal ever to receive Saudi Arabia’s energy portfolio last fall.

His role as oil negotiator was challenging from the start. He blocked Angola from a technical meeting and then argued with the African producer over small cuts, which almost derailed his first major summit as OPEC’s de facto chief in December.


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Oil Rises As Markets Eye OPEC, Russia Meeting On Output Cuts

Oil rebounded on Wednesday after a two-day fall, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic.

Brent crude was up by 21 cents, or 0.8%, at $32.08 per barrel by 0639 GMT after falling 3.6% on Tuesday. U.S. West Texas Intermediate (WTI) crude rose 82 cents, or 3.8%, to $24.45 a barrel after dropping 9.4% in the previous session.


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Thursday’s videoconference meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, is widely expected to be more successful than their gathering in early March. That ended in failure to extend cuts, and a price war between Saudi Arabia and Russia amid slumping demand.

But doubts remain over the role of the United States in any production curbs.

“Whether the United States will join output cuts is closely watched as the market’s focus remained on OPEC meeting,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul. “Oil prices have been volatile as the market is in wait-and-see mode.”

Saudi Arabia, other OPEC member countries and Russia, a grouping known as OPEC+, are likely to agree to cut output, but that accord could be dependent on whether the United States would go along with cuts. The U.S. Department of Energy said on Tuesday that U.S. output is already declining without government action.

Iran’s Oil Minister, Bijan Zanganeh, said Iran does not agree with holding any OPEC+ meeting without a clear-cut proposal and expected outcome from such talks, according to a letter sent to OPEC and seen by Reuters.

“Saudi Arabia and Russia continue to hammer out a deal … What is clear is that the United States must be involved,” ANZ Research said in a note.

U.S. crude production is expected to slump by 470,000 bpd and demand is set to drop by about 1.3 million bpd in 2020, the U.S. Energy Information Administration (EIA) said on Tuesday.

U.S. crude inventories jumped by 11.9 million barrels to 473.8 million barrels in the week to April 3, according to data from the American Petroleum Institute (API) released on Tuesday.

With a drop in fuel demand amid the virus outbreak, gasoline stocks also rose by 9.4 million barrels, marking the biggest one-week gain in the API figures since January 2017.

Official data from the EIA is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.





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Oil Rises 3% On Hopes For Output Cut

Oil prices gained on Tuesday as hopes rose that the world’s biggest producers of crude will agree to cut output as the coronavirus pandemic crushes demand, even as analysts warn a global recession may be deeper than expected.

Brent crude (LCOc1) was up by 93 cents, or 2.8%, at $33.98 a barrel by 0431 GMT after falling more than 3% on Monday. U.S. crude (CLc1) was up by 79 cents, or 3.03%, at $26.87 a barrel, having dropped nearly 8% in the previous session.



The world’s main oil producers including Saudi Arabia and Russia are likely to agree to cut output at a meeting on Thursday, although that would depend on the United States doing its share, sources told Reuters.

But the threat of a major recession hangs over the market due to the halt of much economic activity as a result of the coronavirus pandemic, with half the global population under some form of lockdown or social distancing measures.

“Oil producers have to cut deeply and quickly if they want to avert total saturation of oil markets,” Eurasia Group said.

Worldwide oil demand has dropped by as much as 30%, or about 30 million barrels per day, coinciding with moves by Saudi Arabia and Russia to flood markets with extra supply after an agreement on withholding output fell apart.

Oil prices slumped on Monday after Saudi Arabia and Russia delayed a meeting to agree on output cuts till Thursday.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, a grouping known as OPEC+, had been curtailing production in recent years amid a rapid expansion of U.S. output that made the country the world’s biggest crude producer.

There are also questions over whether the U.S. would join any coordinated action.

U.S. President Donald Trump said on Monday that OPEC had not asked him to push domestic oil producers to cut their production to buttress prices. He also said that U.S. output was declining in response to falling prices.

“I think it’s happening automatically but nobody’s asked me that question yet so we’ll see what happens,” the president told a press briefing on Monday afternoon.

Coordinated action by U.S. oil producers to reduce output would typically be a violation of antitrust laws.

A global recession that economists in a Reuters poll say is under way will likely be more serious than expected a few weeks ago due to the viral outbreak, the latest survey showed.

“We expect energy prices to hover around current levels until economic activity recovers,” Capital Economics said in a note.


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Oil Production Cut: OPEC+ Meeting Delayed

OPEC and Russia have postponed a Monday meeting to discuss oil output cuts until April 9, OPEC sources said on Saturday, as a dispute between Moscow and Saudi Arabia over who is to blame for plunging crude prices intensified.

The delay came amid pressure from U.S. President Donald Trump for the Organization of the Petroleum Exporting Countries led by Saudi Arabia and its allies, a group collectively known as OPEC+, to urgently stabilise global oil markets.

Oil prices hit an 18-year low on March 30 due to a slump in demand caused by lockdowns to contain the coronavirus outbreak and the failure of OPEC and other producers led by Russia to extend a deal on output curbs that expired on March 31.



OPEC+ is working on a deal to cut the production of oil equivalent by about 10% of world supply, or 10 million barrels per day, in what member states expect to be an unprecedented global effort including the United States.

Washington, however, has yet to make a commitment to join the effort and Russian President Vladimir Putin on Friday put the blame for the collapse in prices on Saudi Arabia – prompting a firm response from Riyadh on Saturday.

“The Russian Minister of Energy was the first to declare to the media that all the participating countries are absolved of their commitments starting from the first of April, leading to the decision that the countries have taken to raise their production,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement reported by state news agency SPA.

Putin, speaking on Friday during a video conference with government officials and the heads of major Russian oil producers, said the first reason for the fall in prices was the impact of the coronavirus on demand.

“The second reason behind the collapse of prices is the withdrawal of our partners from Saudi Arabia from the OPEC+ deal, their production increase and information, which came out at the same time, about the readiness of our partners to even provide a discount for oil,” Putin said.

The Saudi Foreign Minister Prince Faisal bin Farhan Al Saud disputed Putin’s claims, saying Russia had withdrawn and that statements about the kingdom’s withdrawal from the OPEC+ deal was devoid of truth, state agency (SPA) reported on Saturday.

OPEC sources, who asked not be identified, said the emergency virtual meeting planned for Monday would likely now be postponed until April 9 to allow more time for negotiations.

OPEC sources later downplayed the Saudi-Russia row, saying the atmosphere was still positive, although there was no draft deal yet nor agreement on details such as a reference level from which to make the production cuts.

“The first problem is that we have to cut from the current production level now, not to go back to the one before the crisis,” one of the OPEC sources said. “The second issue is the Americans, they have to play a part.”

OIL RISES FROM LOWS

Oil recovered from this week’s lows of $20 per barrel with Brent settling at $34.11 on Friday, still far below the $66 level at the end of 2019. Prices had their biggest one-day gain ever on Thursday when Trump said he expected Russia and Saudi Arabia to announce a major production cut.

The United States is not part of OPEC+ and the idea of Washington curbing production has long been seen as impossible, not least because of U.S. antitrust laws.

Still, the oil price crash has spurred regulators in Texas, the heart of U.S. oil production, to consider regulating output for the first time in nearly 50 years.



But U.S. Energy Secretary Dan Brouillette, in a call with oil industry leaders on Friday, did not mention the possibility of U.S. production cuts, a source who listened to the call said.

On Saturday, U.S. President Donald Trump focused instead on tariffs as a response to the oil price crash.

“If I have to do tariffs on oil coming from outside or if I have to do something to protect our … tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump told reporters in a briefing about the coronavirus outbreak.

“The President has now told us what Plan B is: tariffs,” said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.

Russian Energy Minister Alexander Novak told Russian state media he understood that the United States had legal restrictions on output cuts but it should still be flexible.

Other oil producers that do not belong to OPEC+ have indicated a willingness to help. Canada’s Alberta province, home to the world’s third-largest oil reserves, is open to joining any potential global pact.

Norway, Western Europe’s largest oil and gas producer, said on Saturday it would consider cuts to its oil output if a wide global deal is agreed.

Mexican President Andres Manuel Lopez Obrador on Saturday called on Russia and Saudi Arabia to reach a deal soon to end their price war.

The International Energy Agency warned on Friday that a cut of 10 million bpd would not be enough to counter the huge fall in oil demand. Even with such a cut, inventories would increase by 15 million bpd in the second quarter.




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Trump Says He’d Use Tariffs If Needed To Protect Oil Industry

Trump said Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry, a day after meeting with U.S. industry leaders. A gathering of OPEC and other major producers scheduled for Monday was delayed until later in the week as Saudi Arabia and Russia traded barbs about who’s to blame for the collapse in crude prices.

Optimism over prospects for a deal sent benchmark oil futures to a record gain this week, despite an unprecedented global demand loss from the Covid-19 outbreak. A failure to come to an agreement would likely cause prices to crater again. The U.S. oil industry is split on the idea of tariffs, with some independent shale producers — who’ve been hardest hit by the recent market slump — in support, while refiners and large integrated companies are typically opposed.

The American Petroleum Institute, which helped arrange Friday’s meeting, argues tariffs would inject uncertainty into an already rattled global marketplace.

“If I have to do tariffs on oil coming from outside, or if I have to do something to protect thousands and tens of thousands of energy workers, and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump said Saturday. Low oil prices are “going to hurt a lot of jobs,” he said.

Measures to stem the coronavirus outbreak has forced businesses to shut and billions of people around the world to stay at home, causing demand for gasoline, diesel and jet fuel to collapse by tens of millions of barrels a day.

Hundreds of thousands of U.S. oil industry jobs are hanging in the balance, with about $15 billion of investments wiped out from the budgets of shale explorers and many of them on the brink of bankruptcy.



On Friday, Trump had suggested he wasn’t inclined to target Russia or Saudi Arabia with oil tariffs.

“It’s a free market. We’ll figure it out,” he told reporters after Friday’s meeting with the heads of Exxon Mobil Corp., Chevron Corp. and other major producers. “Ultimately the marketplace will take care of it.”

In a statement early on Saturday, the Saudi Foreign Minister Prince Faisal bin Farhan said comments by Putin laying blame on Riyadh for the end of the OPEC+ pact between the two countries in March were “fully devoid of truth.”

Trump still expressed optimism that Russia and Saudi Arabia would reach a deal.

“I think they’re going to settle it, you know why? Because they’re going to be destroyed, they’re destroying themselves if they don’t.”




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Russia Press U.S. To Coordinate Oil Cuts, Pushing Up Prices

Saudi Arabia and Russia are pressing the U.S. to coordinate oil output cuts in an attempt to stabilize prices, OPEC officials said, as the demand for crude plummets amid the coronavirus pandemic.

U.S. oil companies are divided over the proposed cooperation between the world’s three biggest crude-producing nations, which would be unprecedented. Some major oil companies, including Exxon Mobil Corp. and Chevron Corp., are opposed to the plan. Some American shale producers, including Pioneer Natural Resources Corp., are trying to find ways to join the Saudi-and-Russia-led plan.

Top executives from U.S. energy companies were expected to take up the matter in a White House discussion convened by President Trump on Friday. Oil prices jumped by double-digit percentages a second straight day on hopes of a detente in the global price war.

The Saudi-led Organization of the Petroleum Exporting Countries and 10 nations led by Russia are set to hold a virtual emergency meeting on Monday. The group is considering whether to invite representatives from the U.S. and Canada, including from Texas and Alberta. The outcome of Monday’s summit will largely depend on whether Mr. Trump and U.S. oil companies can reach a consensus Friday on oil production cuts.

While the U.S. government and some companies cannot formally join the 23-nation Saudi-and-Russia-led alliance because of antitrust and sovereignty issues, they are trying to figure out ways to convince Saudi Arabia and Russia to reduce output. Riyadh and Moscow have privately made it clear they won’t cut output unless U.S. producers do so as well.



Mr. Trump said Thursday he was hopeful that a truce could be worked out in the oil-price war between Saudi Arabia and Russia after he had spoken to Saudi Crown Prince Mohammed bin Salman.

Saudi Arabia, the world’s largest crude exporter, slashed its prices and said it would unleash a flood of oil last month after it failed to reach a deal with Moscow on a response to falling demand. The ensuing price war, along with lockdowns and travel bans amid the pandemic, have pushed oil prices to their lowest level in 18 years.

Mr. Trump’s remarks on Thursday sparked a record-breaking percentage climb in oil prices, with Brent and U.S. crude notching gains of 21% and 25%, respectively.

Brent crude, the global benchmark rose another 14% to $34.11 a barrel on Friday. West Texas Intermediate futures, the U.S. bellwether, gained 12% to $28.34 a barrel. Still, both price gauges have lost about half their value since the start of the year.

The drop has prompted U.S. producers to slash drilling budgets and idle rigs. The number of rigs drilling domestically fell to 664 Friday, down from 770 a month ago, according to Baker Hughes Co.

Yet it could be months before the slowdown results in diminished output. U.S. crude production has held near a record level of 13 million barrels a day through March 27.

The Saudi-and-Russia led alliance will discuss output curbs of 10 million barrels a day including North America, on the Monday conference call, the officials said. It wasn’t clear whether North American producers would participate. They haven’t attended OPEC gatherings in many years.

Under that option, Saudi Arabia would reduce output by 3 million barrels a day from current levels, a group of other Persian Gulf countries and Russia by 1.5 million barrels a day each, these people said. Oil producers outside the Saudi-Russian oil alliance, in the U.S., Canada, Brazil and others, would reduce output by about another 2 million barrels a day, they said. The rest of the cuts would be shared between smaller producers who already belong to the Saudi-Russian alliance.

Among those are some U.S. shale producers, who have told OPEC they were ready to carry voluntary production cuts amid a ballooning oil glut, said people familiar with the matter. Some of them, in Texas, are backing the possible curtailment of 500,000 barrels a day, these people said. But major oil companies are worried any concerted curbs could expose them to risks of lawsuits on antitrust grounds, they said.

Russian President Vladimir Putin said Friday that his country was ready for a deal with OPEC and the U.S. He said that a collective cut of 10 million barrels a day would be needed to balance the market.

“We are all concerned about the way the situation is developing, everyone is interested in joint and—I’d like to stress it—coordinated actions to ensure long-term market stability,” Mr. Putin said during a video meeting with Russian oil officials.


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Vagit Alekperov, the head of Russian oil major Lukoil, said that it wasn’t clear by how much Russia would cut production as the situation “changes every day.”

The U.S. Department of Energy is also looking at ways to convince the Saudi-and-Russia-led groups that U.S. producers can follow through with any voluntary curbs they propose, the people said. Many OPEC officials don’t believe the U.S. producer will voluntarily reduce production without U.S. government intervention.

While the output reductions could help cushion the current oil price crash, most analysts say it won’t be enough to make up for how much fuel demand the pandemic has erased. Goldman Sachs, for instance, estimates oil demand this week fell by 26 million barrels a day—or a quarter of global demand.

“The benefits from a likely modest reduction in global crude oil supply are still likely to be swamped by the decline in crude oil demand,” said CFRA Research analyst Stewart Glickman.



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Goldman: U.S. Measures Could Support Oil Prices Near Term

Supply restraint by core-OPEC producers could push second-quarter Brent oil prices up to $30 a barrel, while U.S. measures to support the market could underpin prices in the near term, Goldman Sachs (NYSE:GS) said in a research note.

Citing Wall Street Journal reports that the United States was considering intervening in the ongoing Saudi-Russian price war and Texas regulators may curb oil output, the U.S. investment bank said such action would reduce global and U.S. domestic supplies.



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U.S. crude oil prices rose more than $1 on Friday, extending steep gains from the previous session, after U.S. President Donald Trump said he would “get involved” in the price war at an “appropriate time”.

While any U.S. measures could support the oil market into the second half of the year, however, Goldman Sachs said accompanying supply cuts would still not be enough to offset the 8 million barrels per day (bpd) demand loss – brought about by countries slowing economic activity to halt the spread of the coronavirus which has caused nearly 10,000 deaths worldwide.

“Medium-term, the impact of such policies will depend on their political viability given the upcoming presidential election,” Goldman Sachs said in the note issued on Thursday.

U.S. production quotas could create a $5 to $10 upside to Goldman Sachs’ West Texas Intermediate price forecast of $40 to $45 a barrel in 2021, the bank said.

While a return to U.S. oil supply management policies of the 1970s and 80s would “help support prices in the third and fourth quarter above our $30 and $40 a barrel Brent forecast, they would simply replace OPEC’s artificial price support policy with another,” the bank said, referring to the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a key member.



Oil extends recovery as Trump hints at intervening in Saudi-Russia price war

Oil prices recovered further on Friday, following steep gains in the previous session after U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an “appropriate time”.

Prices were also supported by United States’ plans to buy up to 30 million barrels of crude oil for its emergency stockpile by the end of June, while regulators in the country’s largest oil-producing state Texas were reportedly considering curtailing production.

The more active West Texas Intermediate (WTI) crude futures contract for May was up 43 cents, or 1.7% at $26.34 a barrel by 0540 GMT. The contract rose as much as 5.5% to $27.34 per barrel earlier in the session.

U.S. crude futures for April (CLc1) also rose 43 cents to $25.65 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.

“An astonishing rebound in crude oil prices overnight was primarily driven by U.S’s consideration to intervene in the oil market by increasing strategic reserves, while slashing some oil production,” said Margaret Yang, market analyst at CMC Markets.

“The underlying issue is that global energy demand is falling sharply as more countries join the ‘lockdown’ club. The severity of Covid-19 for the macro-economy could exceed anyone’s expectation, and it could last for a long period of time.”

Brent crude futures (LCOc1) climbed 28 cents, or about 1%, to $28.75 per barrel.

The international benchmark rose 14.4% on Thursday in its biggest one-day gain since September, but was on track for its fourth consecutive weekly drop on Friday.

U.S. crude and Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down, which led Saudi Arabia to ramp up supply.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.


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“The outsized gains by WTI reflect the hope and not the reality of the U.S. shale industry. Russia and Saudi Arabia have zero interest in helping US shale survive. Just the opposite, in fact,” said Jeffrey Halley, senior market analyst at OANDA.

“Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began.”





Oil’s Spectacular Collapse Continues

Oil prices extended the gloom on Monday after a Saudi-Russian price war and an equities meltdown sparked by the coronavirus pandemic saw their biggest weekly losses in more than a decade. US benchmark West Texas Intermediate (WTI) briefly fell below $30 a barrel, or 5.5 percent, in morning Asian trade before regaining its footing.


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It was trading at $31.13 a barrel at around 0530 GMT, down nearly two percent from Friday’s close. The Brent global benchmark was down 3.28 percent at $32.74 a barrel.

Last week’s price war began after Saudi Arabia and other members of an informal alliance of major crude producers led by the OPEC oil cartel pushed for an output cut to combat the impact of the virus outbreak.


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But alliance partner and non-OPEC member Russia, the world’s second-biggest oil producer, refused — prompting Riyadh to drive through massive price cuts and pledge to boost production.

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The COVID-19 outbreak added to downward pressure as it throttled global equities, with growing concerns over a potential worldwide recession and escalating travel restrictions prompting a crash in demand forecasts.

Prices made a feeble rally late last week after US President Donald Trump announced $50 billion in Federal spending to stem the damage from the coronavirus and plans to buy “large quantities of crude oil” to top up strategic reserves.

But both benchmarks still fell by around 25 percent in the biggest weekly drop since the global financial crisis in 2008, and more losses are expected.

Rallies will likely continue to fade so long as the market continues to weigh the double-whammy of the COVID-19… and the massive jump in supply,” said Stephen Innes, global chief markets strategist at AxiCorp.

“The rare combination of severe shocks to both supply and demand has caused the crude market to collapse as producers… steel themselves for an unexpected glut of oil in coming weeks,” added Sukrit Vijayakar of Trifecta Consultants.








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Global Markets In Turmoil As Oil Plunges

Oil plunged more than 25%, 10-year Treasury yields dipped below 0.4%, stocks dropped, and currencies swung as the prospect of an energy glut ratcheted up turmoil across markets world-wide.

Investors are responding to Saudi Arabia’s decision over the weekend to cut most of its oil prices and boost output, despite existing threats to demand from the coronavirus epidemic. The move escalates a clash with another major oil producer, Russia.

“The fear today is about a global recession,” said Thomas Hayes, chairman of Great Hill Capital, a hedge fund-management firm based in New York. He said lower oil prices make it more likely some companies would default on their debts.



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If Russia doesn’t come back to the negotiation table soon, investors worry companies will default, making banks less willing to lend, and causing the economy to stutter, he said.

Trading in futures tied to the S&P 500 fell by the maximum 5% allowed in a single session. This meant trading was limited for the first time since shortly after President Trump’s 2016 election victory. By early afternoon in Hong Kong on Monday, S&P 500 e-Mini contracts were 4.9% lower at 2,819.00, about 16.8% below a recent high registered on Feb. 19.

U.S. government bonds, which have already rallied to unprecedented highs, extended gains. The yield on the 10-year Treasury tumbled to 0.387%. Yields move inversely to prices. In Europe, the pan-continental Stoxx Europe 600 index dropped 2.8% with France’s CAC 40 benchmark dropping 2.7% and the U.K.’s FTSE 100 off 8.4%.

In the Asia-Pacific region, the S&P/ASX 200 index in Australia dropped 7.3%, suffering its worst day since October 2008, during the depths of the global financial crisis. The Australian dollar, which is sensitive to shifts in demands for commodities, fell more than 1%, with one Australian dollar buying 65.35 U.S. cents.

Japan’s Nikkei 225 declined 5.1%, its biggest daily drop since 2016. The yen, which often rallies in times of market stress, surged to trade below 103 to the dollar, at its strongest levels since 2016.

Benchmark stock indexes in Hong Kong and Shanghai dropped more than 4% and 2%, respectively. China’s onshore markets, in Shanghai and Shenzhen, have been comparatively resilient in recent weeks.

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Saudi Arabian state oil giant Aramco said in a notice to buyers sent Saturday that it was cutting most of its prices, while preparing to boost crude output. Oil prices dropped after the market reopened Sunday evening in New York. Brent crude, the global gauge of oil prices, fell about 27.5% to $32.84 a barrel, and U.S. crude futures fell by a similar amount.

Last week, Saudi Arabia was unable to persuade Russia to join its plan for deeper crude production cuts at a gathering of the Organization of the Petroleum Exporting Countries and its allies in Vienna. The failure signaled the end of a four-year collaboration between OPEC’s member nations and 10 nonmembers led by Russia.

“The collapse of the talk between Russia and OPEC crushed investors’ confidence,” said Alvin Ngan, a strategist with Zhongtai International Holdings in Hong Kong, adding that sentiment was already fragile given the uncertainties created by the novel coronavirus.

In Australia, large energy stocks plunged by double-digit percentages on fears of a prolonged period of low crude-oil prices. Shares in Woodside Petroleum Ltd. fell by 18% while mining giant BHP Group Ltd. dropped by 14%.

The ASX 200 has now fallen 19.6% since hitting an all-time high on Feb. 20, putting it close to bear-market territory, which is typically defined as a peak-to-trough decline of more than 20%. The Nikkei 225 has fallen more than 18% from its highest closing level this year.




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OPEC Agrees To Drastic Oil Cuts

The plan approved Thursday by the Organization of the Petroleum Exporting Countries would involve production cuts of 1 million barrels a day through the end of June to be shared among its 13 member nations. It also calls for another 500,000 barrels of daily cuts to be divided among the cartel’s 10 Russia-led oil-producing allies.

OPEC earlier in the day had agreed to only a three-month cut. But Saudi Arabia decided it wanted to force Russia into a more ambitious effort. Other OPEC members worried that the plan announced earlier in the day had failed to stimulate flagging prices, cartel delegates said.

“It’s a gamble,” one delegate said.

Brent crude, the global benchmark oil price, ended the day down 2.2%.

The production cuts would come on top of 500,000 barrels a day of existing curbs, which OPEC has agreed to carry through the end of the year, the cartel said. Saudi Arabia and other Persian Gulf producers are also considering additional production cuts outside the group, delegates said.

The coronavirus’s impact on oil demand has weighed heavily on recent talks among members of the so-called OPEC+ alliance led by Saudi Arabia and Russia. Brent is down 23% so far this year, as the virus outbreak hammers global demand.

The epidemic is expected to diminish global crude demand by as much as 2.1 million barrels a day in the first half of 2020, according to an estimate from Goldman Sachs. Meanwhile, IHS Markit and Standard Chartered forecast a decline in demand for 2020’s first two quarters by around 2 million barrels a day from the same period a year earlier. Gulf nations’ additional cuts would take OPEC+’s cuts to 2.1 million barrels a day.

“It’s not just about bleeding demand growth,” said Mohammad Darwazah, director for geopolitics and energy at Medley Global Advisors. “We’ve had inventories building through this whole period and it’s about cleaning up the market and 2.1 [million barrels in cuts] would go a long way to reversing these builds.”

oil-cuts

The OPEC plan needs the approval of Russia and other non-OPEC allies, which are set to weigh the proposal on Friday. Russia has agreed in principle to reduce its output but hasn’t approved any production figure, OPEC officials said.

“Tomorrow, everything depends on a non-OPEC agreement,” Iran’s oil minister, Bijan Zanganeh, told reporters as he exited the meeting. “If [Russia] doesn’t accept it, we have no deal…We have no plan.”

Russian Energy Minister Alexander Novak refused to endorse the Saudi-backed plan at a technical meeting Wednesday and flew back to Moscow to consult with President Vladimir Putin, according to OPEC delegates. Mr. Novak also wants Russia to increase output this summer, a move that contradicts the cartel’s nine-months plan, according to one delegate.


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An OPEC official who attended Wednesday’s gathering said Moscow’s delays are negotiation tactics aimed at securing a deal that would have Russia cut relatively little. Russia is now seeking cuts of about 100,000 barrels a day, leaving Saudi Arabia to bear the brunt of the reduction effort, OPEC officials said.

Russia’s hard bargaining is increasingly wearing down Saudi Arabia and its Gulf allies, casting a cloud on the future of their four-year alliance. “Maybe it’s time to consider the whole point of non-OPEC,” said one Persian Gulf official.

The Saudis’ commitment to carry the bulk of the cuts on their own could lead to further complacency among OPEC nations, some of which have historically flouted production cut agreements.

“The Saudis want collective action, and going above and beyond means they may only encourage more free-riding,” said Medley Global Advisors’ Mr. Darwazah.

Oil prices swung higher following the news that Saudi and its Gulf neighbors were considering their own additional cuts, before quickly reversing those gains.





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Oil Steadied Above $56 A Barrel After Two Days Of Declines

Oil steadied above $56 a barrel on Tuesday after two days of declines as OPEC output cuts and Libyan supply losses balanced concerns about the spread of the coronavirus and its impact on oil demand.

Crude fell almost 4% on Monday, with other commodities also reporting losses while U.S. and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic.

Brent crude rose 5 cents to $56.35 a barrel by 1338 GMT. U.S. West Texas Intermediate crude was up 16 cents at $51.59.

“Risk appetite appears to be growing again on the markets,” said Commerzbank (DE:CBKG) analyst Eugen Weinberg. He added that the virus and resulting impact on demand is not expected to disappear anytime soon.

South Korea aims to test more than 200,000 members of a church at the centre of a surge in coronavirus cases. The virus is also spreading in Europe and the Middle East.

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Concern about the demand impact from the virus has pushed Brent down by almost $10 a barrel this year despite the shutdown of most of Libya’s output and a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and allies.

Prices received further support as lawmakers based in areas of eastern Libya on Monday said that they would not participate for now in peace talks.

“Libyan peace talks appear to have taken a further blow with both sides announcing the end of their participation, pointing to lost crude volumes from the country carrying on for now,” JBC Energy analysts said in a report.

However, oil could come under more pressure from the latest U.S. supply reports.

Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 2130 GMT.

Potential support for prices could also come from OPEC and allies including Russia, which are considering whether to curb output further. However, scepticism is growing about the chance of further action.

“Doubts are emerging about the willingness of OPEC+ to extend and expand the necessary production cuts,” said Commerzbank’s Weinberg. The producers are due to meet in Vienna over March 5-6 to decide policy.

Saudi Arabia’s energy minister on Tuesday said OPEC+ should not be complacent about the coronavirus. But Russia, key to any deal, has yet to announce its position on further curbs.







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OPEC Wants To Raise Oil Prices


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The coronavirus outbreak has interrupted economic activity in China with entire cities on lockdown and travel restrictions putting a huge dent in demand for oil. Quite how much this will hit crude demand is unclear — but Chinese energy executives have said oil consumption in the country in February could be 25 per cent lower than a year earlier. That is the equivalent of a 3 per cent drop in global consumption.

As uncertainty lingers about when the transmission of the virus will peak, oil prices have tumbled more than 15 per cent since the beginning of the year to trade around $55 a barrel, a level at which many smaller producers struggle to remain profitable.

The demand shock and resulting price plunge is jolting Opec nations led by Saudi Arabia and ally producers including Russia into action to support prices. The group’s advisory body has recommended that they deepen their existing supply cuts by 600,000 barrels a day to a total of 2.7m b/d for the first half of 2020.



The question for oil traders is whether this will be enough to steady the oil market and push prices higher. Optimism in the market is hard to find. “It may prove to be a damp squib,” said Stephen Brennock of PVM, a broker. “After all, a hefty supply imbalance prevailed even before the outbreak of the coronavirus. There is therefore no guarantee that the proposed cuts will rid the oil market of its current malaise.” Moscow is also sceptical about supporting the cuts until there is more clarity.

The suggestion of Opec’s advisory body that the extra 600,000 b/d of cuts last through the second quarter of 2020 reflects some optimism about how quickly the impact of the virus outbreak will be contained. But it risks underwhelming the market even if it can be agreed. Harry Dempsey

Will China’s central bank step up measures to offset the coronavirus impact?
As China battles to contain its health crisis, many economists are pencilling in a substantial hit to the economy in the first quarter. This has increased speculation that the country’s central bank could ease monetary policy more to soften the blow.

But with consumer inflation still near a seven-year high, it has limited room to cut interest rates further. On Monday investors will get their first hint at the answer when Beijing releases January readings for its consumer and producer price indices.

Serious easing would entail the People’s Bank of China trying to guide the country’s new, more market-driven lending benchmark lower. But at 4.15 per cent, the so-called loan prime rate is already below December’s consumer price index reading of 4.5 per cent. If consumer inflation does pick up, it could leave China grappling with negative real interest rates should the central bank decide to ease.

Last week, the PBoC announced it would pump extra cash into China’s financial system as part of a package of emergency measures to shield the economy from the effects of the coronavirus outbreak. It said it would provide Rmb1.2tn ($173bn) in additional liquidity to money markets.

But as the death toll continues to mount and the economic impact deepens, analysts are predicting even stronger action from the central bank.

Beijing is likely to “step up” its policy easing when there are signs that the outbreak is proving a headwind to economic growth, Prashant Bhayani, BNP Paribas Wealth Management’s Asia chief investment officer, said in a note. Hudson Lockett

Will cost of living data increase US inflation fears?
The US will receive its own inflation reading on Thursday, with the release of the consumer price index (CPI), which tracks common goods such as food, housing and fuel.

The cost of living as measured by CPI has increased in the past year, with price rises at 2.3 per cent year on year as of December. Yet, despite this uptick, officials at the Federal Reserve remain profoundly concerned about the low level of inflation in the US.

On a separate measure — the Fed’s preferred — the problem looks much more pronounced. The personal consumption expenditures (PCE) price index, at 1.6 per cent year-on-year, remains well below the central bank’s target of 2 per cent.

Jay Powell, Fed chairman, stressed this issue at his first post-meeting press conference of 2020, stating that the central bank was not comfortable with inflation running so persistently below its 2 per cent target.



Moreover, he resolved to act to ensure the US evades the low-inflation trap that has ensnared the likes of Europe and Japan. “We have seen this dynamic play out in other economies around the world, and we are determined to avoid it here in the United States,” he said.

One solution that has gained traction is a so-called “make-up strategy”, in which the central bank commits to raising its inflation target after periods of undershooting in order to make up for lost inflation.

The Fed is nearing the end of a once-in-a-decade review of its monetary policy toolkit, and such a change could be announced when that is released.




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Coronavirus headlines could hang over the market in the coming week, as China reported an additional 89 deaths on Sunday, bringing the total number of deaths in the mainland to 811.

The global death toll from the new coronavirus is now at 813, higher than that of SARS.



There will also be important testimony from Federal Reserve Chair Jerome Powell, who appears Tuesday and Wednesday before congressional panels on the economy and monetary policy.

Meanwhile, on the data front, market players will pay attention to this week’s U.S. consumer price data, which should give clearer signs on the pace of inflation.

There are also U.S. retail sales figures for January, which investors will be eyeing for further signs on the strength of the American consumer.

In earnings, there are 68 S&P 500 companies reporting results in the week ahead, as the earnings season on Wall Street starts to wind down.

1. Coronavirus Headlines

China reported an additional 89 deaths on Sunday, bringing the total number of people killed by the fast-spreading coronavirus to 811 in the mainland. The global death toll for the new coronavirus currently stands at 813, including one death in the Philippines and another in Hong Kong.

That number exceeds the global number of deaths from SARS, which killed at least 774 people and infected 8,096 people worldwide in 2002 and 2003, according to data from the World Health Organization.

The National Health Commission said on its website that 2,656 new cases were confirmed as of end Saturday. This brings the total number to 37,198 in mainland China.

Hubei province, the epicenter of the outbreak, accounts for most of the deaths and cases around the world.

The cumulative number of deaths in the province reached 780 after an additional 81 deaths were recorded as of end Saturday. The Hubei Provincial Health Committee said there was an additional 2,147 new cases, bringing the total of confirmed cases to 27,100.

The Chinese economy will sputter towards normal on Monday after the coronavirus outbreak forced an extended holiday, although numerous stores and factories will remain shut and many white-collar employees will continue working from home.

The toll on China’s already-slowing economy has been heavy, with Goldman Sachs (NYSE:GS) cutting its first quarter GDP target to 4% from 5.6% previously and saying an even deeper hit is possible.

2. Fed Chair Powell Testifies

Federal Reserve Chair Jerome Powell is set to deliver his semi-annual monetary policy testimony on the economy before Senate and House committees in Washington DC.

Powell is scheduled to testify before the House Financial Services Committee at 10:00AM ET (1500GMT) Tuesday. On Wednesday, he will appear in front the Senate Banking Committee, also at 10AM ET.

Text of the testimony will be released 90 minutes before he starts speaking.

The Fed chair is expected to reinforce the signal that policy is on hold given the labor market continues to tighten and private consumption growth remains solid.

3. U.S. Inflation

The Commerce Department will publish January inflation figures at 8:30AM ET (1330GMT) Thursday.

Consumer prices are expected to have risen 0.2% last month, according to estimates, matching the increase seen for December. On a yearly base, CPI is projected to climb 2.5%, up from 2.3% a month earlier.

Excluding the cost of food and fuel, core inflation prices are forecast to have gained 0.2% last month and 2.2% over the prior year.

Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected. Weakening inflation will likely add to expectations that the U.S. central bank will need to slow its pace of rate hikes.

4. U.S. Retail Sales

The Commerce Department will release data on retail sales for January at 8:30AM ET (1330GMT) Friday.

The consensus forecast is that the report will show retail sales rose 0.3% last month, after rising at the same pace in December. Excluding the automobile sector, sales are also expected to increase 0.3%.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

5. Earnings Season Starts to Wind Down

Earnings season on Wall Street moves into its final stretch.

Results from Restaurant Brands International, Allergan (NYSE:AGN), and Loews (NYSE:L) will capture the market’s attention on Monday.

Lyft (NASDAQ:LYFT), UnderArmour, AutoNation (NYSE:AN), Hilton, Hasbro (NASDAQ:HAS), Dominion Energy, and Lattice Semiconductor are on the agenda for Tuesday.

CVS Health (NYSE:CVS), Shopify, Cisco (NASDAQ:CSCO), Applied Materials (NASDAQ:AMAT), CyberArk, CME Group (NASDAQ:CME), Barrick Gold, Teva Pharma, and MGM Resorts report results on Wednesday.

Thursday sees Alibaba (NYSE:BABA), Nvidia, Pepsico (NASDAQ:PEP), Kraft Heinz (NASDAQ:KHC), Roku, AIG (NYSE:AIG), Expedia (NASDAQ:EXPE), Mattel (NASDAQ:MAT), Wyndham Hotels, and post earnings.

Finally, Canopy Growth, and Newell Brands are among the few reporting on Friday.







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China Energy Executives Braced For 25% Fall In Domestic Oil Demand


⇑⇓ China Oil Demand ⇓⇑


Executives at some of the country’s largest refineries expect that nationwide demand will fall by a staggering 3.2m barrels a day in February from last year — a drop equivalent to more than 3 per cent of global consumption.

Oil prices have already crashed on expectations of plunging demand as the Chinese authorities quarantined cities, restricted air and road travel, and extended factory closures following the lunar new year holiday.

But the projections of senior executives in China — the world’s top oil importer — are likely to undermine market confidence further.

Chinese oil demand in February 2019 was just under 13m barrels a day, according to the International Energy Agency.

Opec countries and allies including Russia are scrambling to thrash out a response to a demand shock that could rival the drop in consumption witnessed at the nadir of the global financial crisis in 2008.




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The oil major BP warned this week that the coronavirus outbreak could cut global oil demand by 300,000-500,000 barrels a day on average this year.

Brent crude, the international benchmark, has dropped more than 20 per cent since early January, falling below $55 a barrel earlier this week. It rebounded slightly on Wednesday amid hopes that a treatment for the virus would be found.

Chinese refiners, which process crude to create fuels such as petrol and diesel, are facing a big hit to sales as Beijing struggles to control the spread of the virus.

“The epidemic has dealt a huge blow to our business,” said one executive at a Chinese refinery, who asked not to be identified because of the sensitivity of the issue.

An executive at another refinery said that if the spread of the virus peaked in the coming weeks, China’s oil demand could remain at least 10 per cent lower in March than a year ago.

“We are highly likely to see a 3-4m b/d impact [this month] when you consider the economy has virtually ground to a halt,” said Michal Meidan at the Oxford Institute for Energy Studies.

“Industrial activity is down, passenger movement is down 70 per cent, freight movement is down 50 per cent. The timing question is key. We know for sure there is an effective standstill for two weeks at least.”

If China can quickly contain the spread of the virus, less dramatic forecasts about the demand hit are more likely to prove correct. Chevron said last week it saw a hit of 200,000 b/d on average for the year.

The Opec grouping is considering calling an emergency meeting to decide on the next steps to stop oil prices falling further. Talks are ongoing about whether they need to cut production by 500,000 b/d or more but no decision has yet been made.

Independent Chinese refiners have been particularly hard hit, cutting crude processing rates by at least half, one of the executives said.

They said daily sales of products such as fuel oil and asphalt have dropped by 90 per cent since the end of January, as logistics have been hampered by road restrictions. This has prompted inventories to rise by more than 50 per cent and put pressure on cash flows.

The country’s gasoline and diesel consumption fell almost two-thirds during the new year holiday from a year earlier, said another executive.

The average capacity utilisation rate among independent refineries in Shandong — a centre of the refining trade — has fallen to between 40 per cent and 50 per cent, a historical low, two of the executives said.

“Everyone is waiting for the turning point but no one knows when,” said a refinery executive.




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Goldman Says Oil Rally Likely Shortlived



⇑⇓ STOCK MARKET NEWS TODAY — BUSINESS & FINANCIAL NEWS ⇓⇑

StockMarketNews.Today — A flare-up in U.S.-Iran tension may be keeping oil elevated, but an actual disruption to global crude supplies is needed to keep prices at current levels, according to Goldman Sachs Group Inc .

Price risks for Brent, which has surged about 6% since the U.S. strike killed a top Iranian general, are skewed to the downside in the coming weeks without a major supply disruption, Goldman said in a note dated Jan. 6. Oil was already trading above the bank’s fundamental fair value of $63 a barrel prior to the attack, buoyed by an “over-enthusiastic December risk-on rally” despite limited evidence of an acceleration in global growth, they said.

“It is not a given that any potential retaliation by Iran would target oil producing assets,” Goldman analysts including Jeff Currie said. “The recent incident at the U.S. embassy in Iraq occurred while there was no disruption to neighboring oil fields.”

Brent rallied above $70 a barrel and New York crude edged closer to $65 on Monday as the U.S. warned that there’s a “heightened risk” of missile attacks near military bases and energy facilities in Saudi Arabia, while Iran stated it no longer considers itself bound by the 2015 nuclear pact.

The rhetoric turned even more hostile after President Trump warned Iran of major U.S. retaliation “in a disproportionate manner”, and threatened heavy sanctions on its ally Iraq after its parliament voted to expel American troops from the country in response to the Baghdad attack.

The September strike on key oil producing facilities in Saudi Arabia indicated that the market has significant supply flexibility, according to Goldman. There is only “moderate upside” from current levels, even if an attack on oil assets actually occur, the bank said.

Being long gold is a better hedge than oil to such geopolitical risks, according to Goldman, adding that history shows under most outcomes, the precious metal will likely rally well beyond current levels. The bank maintained its three-, six- and 12-month forecast at $1,600 a ounce.



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EIA: Oil Markets Could Face Oversupply in 2020


◊ Oil Markets ◊


Oil markets are expected to face excess supplies in 2020 due to a production boost amid weak demand growth, the director for energy markets and security at the International Energy Agency said Tuesday. “Overall, we will continue to see a well supplied market in 2020,” said Keisuke Sadamori at the Singapore International Energy Week.

“Unless other things change, we will see a surplus probably, unless there is very strong demand growth recovery,” Sadamori told CNBC. In its latest monthly report, the Paris-based agency cut its oil demand growth figure by 100,000 barrels a day for 2019 and 2020. Oil demand is expected grow at a “still solid” 1.2 million barrels a day in 2020, IEA said in the report.


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Global macroeconomic concerns such as the United States-China trade dispute and the developments surrounding Brexit — the UK’s exit from the European Union trade bloc — are issues clouding the oil market outlook, said Sadamori. The Organization of the Petroleum Exporting Countries, and other producers including Russia, have implemented an output cut by 1.2 million barrels per day since January in a bid to support the market.

However, oil supplies this year have been boosted by non-OPEC members such as the U.S. in shale oil production. Brazil and Norway will also produce more oil next year, said Sadamori. Meanwhile, demand in 2019 has been weak, amid weak growth in the first half and India demand growth slower than expected, he said. Growth in the second half of 2019 is being supported by a low base over the same period in 2018.


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In September, Saudi Arabia was forced to cut its oil production by half following a series of drone strikes on its oil processing facility. The closure affected nearly 5.7 million barrels of crude production a day — or about 5% of the world’s daily oil production.


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While there were concerns about the supply security after the attack, claimed by Yemen’s Houthi rebels, the recovery in supplies has been “quite impressive,” said Sadamori, giving comfort to the Kingdom’s customers around the world and assurance of the stability of world oil markets.




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Oil Jumps as Iran Tanker Blast

Oil jumped back above $60 a barrel after a reported explosion on an Iranian tankerFutures jumped by almost $1 a barrel after the Islamic Republic News Agency reported a National Iranian Oil Company tanker caught fire after a blast, taking the day’s gains to more than 2%. Prices were already higher after U.S. President Donald Trump said talks with Chinese counterparts are going “really well” and that they will continue on Friday, offering a glimmer of hope for global demand.


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The tanker explosion will spur fresh concern about potential conflict in the world’s most important crude-producing region after attacks on ships and drones earlier this year, and most recently a strike on Saudi Arabian energy infrastructure. Oil is still down about 19% from its peak in April as the prolonged U.S.-China dispute adds to a bleak economic outlook.

“The explosion points to potential geopolitical risks and that has once again surprised the market to the upside,” said Will Sungchil Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. “It still remains to be seen whether prices will keep rising as investors are putting their focus on the trade talks and the gains won’t last long if the negotiations result in a no-deal.”

Brent crude for December settlement rose as much as $1.36, or 2.3%, to $60.46 a barrel on the London-based ICE (NYSE:ICE) Futures Europe Exchange. The contract is up 3.5% this week and traded at $60.44 a barrel at 7:37 a.m. in London.


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West Texas Intermediate for November jumped as much as $1.14, or 2.1%, to $54.69 a barrel on the New York Mercantile Exchange. The contract climbed 96 cents to $53.55 on Thursday, the highest level in more than a week. Prices are up 3.5% this week.

See also: Oil Market Next Year ‘a Mess’ for Shale Drillers, Seaport Says

Key Saudi Arabian oil-processing facilities were attacked on Sept. 14, a strike that curbed about 5% of global output and was blamed on Iran. In July, a U.S. ship down an Iranian drone, while oil tankers have been targeted in the Persian Gulf.


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Oil Prices Were Torn On Thursday, Supported By Tightening Sanctions Against Iran Announced This Week

Stock Market News Today Oil prices were torn on Thursday, supported by tightening sanctions against Iran announced this week and pressured by a surge in U.S. supply and concerns of an economic slowdown.

Brent crude futures were at $74.60 per barrel at 0512 GMT, 3 cents above their last close. U.S. West Texas Intermediate (WTI) crude futures were at $65.80 per barrel, 9 cents below their previous settlement.

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Crude futures rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

“Following the U.S. decision to toughen its sanctions on Iran … we have revised up our end-year forecast for Brent crude from $50 to $60 per barrel,” analysts at Capital Economics said in a note.

U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue since President Donald Trump first announced the move last May, a U.S. official said on Thursday during a media call.

“Before sanctions … Iran generated as much as $50 billion annually in oil revenue. We estimate that our sanctions have already denied the regime more than $10 billion since May (2018),” said Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.

The U.S. decision to try and bring down Iran oil exports to zero comes amid supply cuts led by producer Organization of the Petroleum Exporting Countries (OPEC) since the start of the year aimed at propping up prices. As a result, Brent crude oil prices have risen by almost 40 percent since January.

Despite this, Capital Economics said “we still expect oil prices to fall this year as sluggish global growth weighs on oil demand, U.S. shale output grows strongly and investor aversion to risk assets like commodities increases.”

In Asia, South Korea’s economy unexpectedly shrank in the first quarter, the Bank of Korea said on Thursday, marking its worst performance since the global financial crisis.

China’s Premier Li Keqiang saying on Wednesday that his nation’s economy “still faces downward pressure”.

On the supply side, U.S. crude oil production has risen by more than 2 million barrels per day (bpd) since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

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In part because of soaring domestic production, U.S. commercial crude oil inventories last week hit a October 2017 high of 460.63 million barrels, the Energy Information Administration said on Wednesday. That was a rise of 1.3 million barrels.

Budget Needs Are Forcing Saudi Arabia To Push For Oil Prices Of At Least $70 Per Barrel This Year

The export cuts are designed to prop up prices, sources close to Saudi oil policy say. Saudi officials say the kingdom’s output policies are merely intended to balance the world market and reduce high inventories. “The Saudis want oil at $70 at least and are not worried about too much shale oil,” said one industry source familiar with Saudi oil policy.

Another source said Saudi Arabia wanted to “put a floor under oil prices” at $70 or slightly lower, and added: “No one at OPEC can talk about output increases now.”

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Officially, Saudi Arabia, which plans to raise government spending to boost economic growth, does not have a price target. It says price levels are determined by the market and that it is merely targeting a balance of global supply and demand.

Even a price of around $70 a barrel would not balance Saudi Arabia’s books this year, according to figures cited by Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia department in February. For that, he said, Riyadh needs oil prices at $80-$85 a barrel.

Saudi Arabia, the world’s largest oil exporter, also wants to make sure it avoids a repeat of the 2014-2016 oil price crash below $30 per barrel, sources familiar with Saudi policy said. Saudi Arabia plans to reduce March and April oil production to under 10 million barrels per day — below its official OPEC output target of 10.3 million bpd.

A Saudi official told Reuters this month that despite strong demand from customers, state oil giant Saudi Aramco had cut its allocations for April by 635,000 bpd below nominations — requests made by refiners and clients for crude.

Saudi Energy Minister Khalid al-Falih said such swings were not unusual because last year the kingdom had raised output and exports above targets to avoid imminent shortages. Saudi Arabia has also been advocating an extension of OPEC-led supply cuts beyond June until the end of 2019.

Russia, which is not an OPEC member but is cutting output in tandem with OPEC, can balance its budget at oil prices of $55 per barrel and has not made clear yet whether it is prepared to extend them when OPEC next meets in June.

“With budget needs at above $85 per barrel, the Saudis desperately need prices at above $70 per barrel,” said Gary Ross, CEO of Black Gold Investors and a veteran OPEC watcher. “They also need to convince Russia that the strategy of output cuts makes sense despite the loss of market share to the United States,” he said.

The United States and Russia produce 12 million and 11 million bpd respectively. Unlike Russia, the United States pumps at will via its commercial energy sector, led by shale. The International Energy Agency forecasts its output will soar by another 4 million bpd in the next five years.

Those increases would be likely to outpace the growth of global demand and give Washington an even bigger share of the global market, making it a bigger exporter than Saudi Arabia. Riyadh has long been a close ally of the United States and the two countries have coordinated oil policy more closely since Trump became president than under his predecessor, Barack Obama.

Trump has supported Saudi Crown Prince Mohammed bin Salman despite a global outcry over the killing of journalist Jamal Khashoggi, a critic of the Saudi government, and has made clear he expects OPEC to help lower global oil prices.

Last year, Saudi Arabia raised output steeply under pressure from Washington. But it later heard that the United States had granted Iranian oil customers unexpectedly generous waivers and the price of oil subsequently fell to $50 per barrel.

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On Monday, OPEC and its allies, led by Russia, scrapped a planned meeting in April and will decide instead whether to extend output cuts in June, once the market has assessed the impact of new U.S. sanctions on Iran due in May over its non-compliance with a deal to curb its nuclear program. “We have to wait and see what the Americans will do first,” a second OPEC source said.

There is, however, no guarantee Saudi policy will remain unchanged if Washington puts pressure on Riyadh to raise supply. “They (the Saudis) do care about Trump, but they can’t do whatever he says every time,” an OPEC source said.

Crude Oil Production Cuts: Iraq, OPEC’s Second-Largest Producer, And Russia, Failed To Respect Their Commitments In The First Two Months Of The Year

OPEC and a group of 10 oil-producing nations led by Russia are deepening their crude production cuts, but remain split on whether the curbs should remain in place through the end of the year, officials said Sunday.

Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, met with Russia and a few other countries to review how the 24-nation coalition is complying with a December agreement to withhold 1.2 million barrels a day from global markets.

The broad coalition implemented cuts in February that achieved about 90% of the amount it agreed to, Saudi Energy Minister Khalid al-Falih said at a press conference following the group’s technical meeting. In March the cuts will be “above 100% easily,” he said, meaning the coalition will hold back slightly more than the 1.2 million daily barrels.

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The output cuts were meant to shore up oil prices in the midst of a global glut of crude. The effort has led to a more than 25% rise in price of Brent oil, the global benchmark, since the year began.

Iraq, OPEC’s second-largest producer, and Russia, the cartel’s largest external ally, failed to respect their commitments in the first two months of the year. But Russian Energy Minister Alexander Novak said his country is now complying with agreed-upon reductions of 230,000 barrels a day. He said the delays were due to freezing weather conditions.



His Iraqi counterpart, Thamir Ghadhban, said Baghdad was sharply reducing exports. Even so, a divide emerged among the coalition on when the output cuts should end. The current agreement expires in June, and the group disagrees about the impact of U.S. sanctions on OPEC members Venezuela and Iran.

The Trump administration banned Iran’s oil exports beginning in November but granted waivers to a limited number of countries to allow for continued crude purchases. The administration is due to decide on whether to extend the waivers by May. Washington also prohibited the purchase of crude from the Venezuelan regime of Nicolás Maduro in January.

Production levels from Iran and Venezuela “have not declined precipitously—to the point where we see there are still inventory builds,” Saudi Arabia’s Mr. Falih said. “We need to stay the course certainly until June,” he said, adding that the output cuts may have to be pursued until the end of 2019.

Russia’s Mr. Novak said uncertainty over the implementation of U.S. sanctions blurred the group’s planning on future curbs. “We don’t know what will happen in April, so we can’t forecast the second half,” he said.

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Shale Companies, Adding Ever More Wells… Newer Wells Drilled Close To Older Wells Are Generally Pumping Less Oil And Gas And Could Hurt Output


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Shale companies’ strategy to supercharge oil and gas production by drilling thousands of new wells more closely together is turning out to be a bust. What’s more, the approach is hurting the performance of older existing wells, threatening the U.S. oil boom and forcing the maturing industry to rethink its future.

To maintain America’s status as an energy powerhouse, shale companies in recent years have touted bunching wells in close proximity, greatly increasing the number of wells drawing on a promising reservoir. The added wells would produce as much as older ones, many drillers believed, allowing them to extract more oil overall while maintaining strong returns from each well.



Those rosy forecasts helped fuel investor interest in shale companies, which raised nearly $57 billion from equity and debt financing in 2016, according to Dealogic, even as oil prices dipped below $30 a barrel. That was up from nearly $34 billion five years earlier, when oil topped $110 a barrel.

Now the results are coming in, and they are disappointing. Newer shale wells drilled close to older wells are generally pumping less oil and gas than the older wells, according to early corporate results. Engineers warn the new wells could produce as much as 50% less in some circumstances.


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The newer shale wells often interfere with the output of older wells, because blasting too many holes in dense rock formations can damage nearby wells and lower the overall pressure, making it harder for oil to seep out. The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir.

Known in the industry as the “parent-child” well problem, the issue is surfacing in shale hot spots across the U.S. as companies ramp up production. Most of the tens of thousands of planned new wells will be child wells—wells drilled close to an already producing well.

It is one of the primary reasons why thousands of shale wells drilled in the past five years are producing less oil and gas than companies forecast to investors, a Wall Street Journal examination of drilling data has found.

In February 2018, RSP lowered its estimate of drilling spots in the area to 2,440 wells. The company said it had found that spacing wells closer than 400 feet hurt production, and it had come to believe that 450 feet was the optimum spacing in the Midland area.


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A month later, in March 2018, Concho Resources acquired RSP for $9.5 billion, or about $75,000 per acre, creating a Permian giant. In a presentation announcing the deal to investors, Concho estimated RSP’s total inventory of drilling sites, which includes areas outside Midland, was about 30% lower than RSP’s previous estimate.

A Concho spokeswoman declined to comment. The company has previously said it would drill wells 660 feet apart in the Midland area and that synergies created by the merger will save money and allow it to go into a “manufacturing mode” of large-scale drilling projects.

When the deal closed in July, the combined market cap of Concho and RSP was nearly $30 billion. The current value of the combined company is $22 billion.


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U.S. Crude Prices Are Up 25% So Far This Year


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Oil prices are off to their best-ever start to a year as fears of a supply glut cool, part of a 2019 recovery in risky investments from stocks to commodities.

U.S. crude-oil futures have rebounded 25% in the first two months of the year, according to Dow Jones Market Data, the best January-February performance in figures going back to 1984. Oil is also heading for its best two-month stretch generally since 2016—when prices recovered in April and May of that year after dipping below $27 a barrel.



Oil rose 2.6% Wednesday to $56.94 a barrel after Saudi Arabia’s energy minister reiterated the country’s commitment to curbing output, the latest example of the de facto head of the Organization of the Petroleum Exporting Countries defying calls by President Trump to keep prices low. Crude had tumbled Monday after Mr. Trump tweeted prices were too high. Wednesday’s rebound puts prices near the highest level since November.

This year’s rally comes after a punishing decline. Crude prices fell 44% from their multiyear peak in early October to a Christmas Eve trough as investors fretted that a global economic slowdown would weaken demand for a range of commodities.

Energy investors have been among the biggest beneficiaries of the Federal Reserve signaling a cautious approach to further interest-rate increases and the U.S. and China moving toward a trade agreement. The S&P 500 energy sector has risen 14% so far this year, versus 11% for the broader index.


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On Wednesday, energy stocks were among the market’s best performers, with the S&P 500 energy sector rising 0.4%. Fears linger that demand for oil will stall. But the International Energy Agency still expects consumption to increase each quarter this year from a year earlier, albeit at a slower-than-usual pace in the first quarter.

Additionally, Saudi Arabia and other OPEC members have curbed output, despite calls from President Trump for the cartel to keep prices low. Anxiety also remains about the impact of U.S. sanctions on Iran and Venezuela, fueling bets that prices can at least stay steady even if the rally stalls.

“Too many international barrels have been taken off the market,” said Bob Yawger, director of the futures division at Mizuho Securities USA. “There’s a lot of uncertainty around production.”

Because of the Venezuela sanctions, some analysts expect the U.S. will extend waivers to buyers of Iranian crude that were exempted from last November’s penalties to avoid significant market disruptions. The waivers allowed several countries to continue buying Iranian crude through April.

Both Iran and Venezuela were exempted from the December OPEC agreement to lower output because of the sanctions on their respective oil industries. Saudi Arabia and others in OPEC are likely to back a continuation of production curbs when the group meets in April, The Wall Street Journal reported Monday. Saudi Arabia accounted for much of the cartel’s drop in January production, lowering output by 400,000 barrels a day, while Russian supply came down by just 78,000 barrels a day, IEA data show.

Energy Information Administration figures on Wednesday showed U.S. crude imports fell to their lowest level since 1996 last week, a sign of steady domestic oil demand.


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But many analysts are keeping a close eye on output from Saudi Arabia and Russia because many expect steady U.S. shale production growth to continue. The EIA said Wednesday that U.S. oil production climbed to a record 12.1 million barrels a day during the week ended Feb. 22.

That compares with January U.S. output of roughly 11.9 million barrels a day and 11.4 million barrels a day from Russia and 10.7 million from Saudi Arabia. Worries about steady U.S. supply pushed West Texas Intermediate futures, the U.S. oil benchmark, down more than 3% Monday, though they have recovered much of that slide. Crude-oil futures began trading in 1983.

“I would be surprised if WTI got above $60,” Mr. Yawger said. “Domestic production is too great.” Some analysts also worry lockstep moves by stocks and commodities have set markets up for another rapid reversal if momentum changes and investors retreat from risk. U.S. crude and the S&P 500 have moved in the same direction 60% of the time so far this year.

The rolling correlation between the S&P 500 and S&P GSCI commodity gauge—heavily weighted toward oil and other energy products—increased to 0.94 last week for the first time since March 2016, according to Dow Jones Market Data, which looked at time spans of 50 days. Correlation is measured on a scale of minus-1 to 1. A reading of minus-1 means two assets are moving perfectly in opposite directions, while a correlation of 1 means they are moving in tandem.


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China-U.S. Trade – Oil Prices Pressed Higher, Marking Fresh Three-Month Highs On Friday


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Oil prices pressed higher, marking fresh three-month highs on Friday, as investors celebrated a meeting between U.S. President Donald Trump and China’s top trade representative, Vice Premier Liu He.

New York-traded West Texas Intermediate crude futures rose 50 cents, or 0.88%, at $57.46 a barrel by 9:39 AM ET (14:39 GMT), after touching $57.81 earlier, its best level since November of last year. Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., traded up 32 cents, or 0.48%, to $67.39, backing off of $67.72, which was also its best level in three months.



Markets interpreted the fact that Trump agreed to meet with Liu at 2:30 PM ET (19:30 GMT) on Friday as a sign that trade discussions were progressing and the implementation of an increase in U.S. tariffs on Chinese products on March 1 would likely be delayed.

Investors have feared that the standoff between the U.S. and China could negatively impact economic growth, diminishing the demand for oil from the world’s two largest consumers. Apparent progress in negotiations this year along with OPEC-led efforts to slash production has supported the rally in oil prices, with gains of more than 20% in 2019.


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Some analysts remained cautious, however, amid a wide range of pending issues, including sanctions on Venezuela and Iran, a bottleneck in the Canadian production pipeline and maintenance difficulties in Saudi Arabia.

“Slower global growth, a resurgent dollar and record U.S. production are all weighing on prices and causing any rallies to stall relatively quickly,” OANDA market analyst Craig Erlam said. “It has recovered from its selloff late last year, but not as much as you may have expected and there does seem to be a reluctance to hop on board,” Erlam added.

Investors are also wary of escalating production in the U.S., which the Energy Information Administration reported Thursday had hit a record high of 12 million barrels per day last week. In that light, investors will pay close attention as Baker Hughes releases its weekly rig count data, an early indicator of future output, at 1 PM ET (18:00 GMT).

In other energy trading, gasoline futures slipped 0.03% to $1.6139 a gallon by 9:41 AM ET (14:41 GMT), while heating oil advanced 0.16% to $2.0396 a gallon. Lastly, natural gas futures lost 0.22% to $2.691 per million British thermal units.


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Venezuela Seeks OPEC Support Against U.S. Sanctions Imposed On His Country’s Oil Industry


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By Liz Kirbayeva | kir75bayeva@smn.today

Venezuela’s Nicolas Maduro has sought OPEC support against U.S. sanctions imposed on his country’s oil industry, citing their impact on oil prices and potential risks for other members of the producer group.

But a source familiar with the matter said the Organization of the Petroleum Exporting Countries, of which Venezuela is a founding member, had declined to make any formal statement. OPEC says it is concerned with oil policy, not politics.

Today’s Stock Market News – Venezuela Seeks OPEC Support Against U.S. Sanctions
Today’s Stock Market News – Venezuela Seeks OPEC Support Against U.S. Sanctions

More than 40 nations including the United States, European powers and most of Latin America have recognized Maduro’s rival, Juan Guaido, as the country’s rightful head of state, following disputed elections last year.

The request was made in a letter sent to OPEC Secretary-General Mohammad Barkindo dated Jan. 29 and seen by Reuters, a day after the United States imposed sanctions on Venezuelan state oil firm PDVSA.

“Our country hopes to receive the solidarity and full support of the member countries of OPEC and its ministerial Conference, in the fight we are currently having against the illegal and arbitrary intrusion of the United States in the internal affairs of Venezuela,” Maduro wrote.

I seek “your firm support and collaboration to jointly denounce and face this shameless dispossession of … important assets of one of the members of OPEC, the letter said. He wrote that OPEC should help to determine potential solutions based on “the impact that this action has on the global energy market, and the risk it represents for the other countries … of this organization”.

The sanctions on Venezuela have boosted global oil prices, which were trading at around $62 a barrel on Monday. The move has disrupted shipments as more than 20 tankers loaded with Venezuelan oil have been anchored off the U.S. Gulf Coast.

Still, analysts say there is ample spare capacity in other oil producers such as Saudi Arabia plus strategic reserves in consuming nations to compensate for a loss of Venezuela’s exports.

OPEC tends to avoid political disputes involving individual members. Last year, it declined a request from Iran for a discussion of U.S. sanctions against Tehran at a policy-setting meeting.


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Venezuela was once a top-three OPEC oil producer but production has been in decline for years following the collapse of the country’s economy.

Energy research and consulting firm Rystad sees Venezuelan production plummeting to 680,000 barrels per day (bpd) next year, from 1.34 million bpd at the end of 2018. Venezuela pumped 3 million bpd at the turn of the century.

Together with Libya and Iran, Venezuela is exempt from the latest OPEC-led supply cut due to the involuntary decline in production.


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U.S. Rig Count Rise, Crude Oil Prices Slide. Analysts Said Economic Concerns Were Also Weighing On Crude Oil Futures.


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By Sandro Sognussord | leandro.ket@smn.today

Oil prices fell on Monday as drilling activity in the United States, the world’s largest oil producer, picked up and financial markets were pulled down by trade concerns.

A refinery fire in the U.S. state of Illinois, which resulted in the shutdown of a large crude distillation unit, that could cause crude demand to fall also weighed on prices, traders said. U.S. West Texas Intermediate (WTI) crude futures were at $52.09 per barrel at 03:47 GMT, down 63 cents, or 1.2 percent, from their last settlement.

Today’s Stock Market News – Oil Prices Fell On Monday
Today’s Stock Market News – Oil Prices Fell On Monday

International Brent crude oil futures were down 49 cents, or 0.8 percent, at $61.61 a barrel. In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Companies added seven oil rigs in the week to Feb. 8, bringing the total count to 854, pointing to a further rise in U.S. crude production, which already stands at a record 11.9 million bpd. WTI prices were also weighed down by the closure of a 120,000-barrels-per-day (bpd) crude distillation unit (CDU) at Phillips 66‘s Wood River, Illinois, refinery following a fire on Sunday.


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Elsewhere, the head of Russian oil giant Rosneft, Igor Sechin, has written to the Russian President Vladimir Putin saying Moscow’s deal with the Organization of the Petroleum Exporting Countries (OPEC) to withhold output is a strategic threat and plays into the hands of the United States.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June.

OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact. Analysts said economic concerns were also weighing on crude oil futures.

Vandana Hari of Vanda Insights said in a note that crude prices were dragged down “as China returned from a week-long Lunar New Year holiday and regional stock markets plunged into the red amid resurgent concerns over the U.S.-China trade dispute.”

Trade talks between the Washington and Beijing resume this week with a delegation of U.S. officials traveling to China for the next round of negotiations. The United States has threatened to increase tariffs already imposed on goods from China on March 1 if the trade talks do not produce an agreement.

Preventing crude prices from falling further have been U.S. sanctions on Venezuela, targeting its state-owned oil firm Petroleos de Venezeula SA (PDVSA).

“The issues in Venezuela continue to support prices. Reports are emerging that PDVSA is scrambling to secure new markets for its crude, after the U.S. placed additional sanctions on the country,” ANZ bank said on Monday.


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Venezuela Shifts Oil Ventures’ Accounts To Russian Bank, PDVSA’s Move Comes After The United States Imposed New Financial Sanctions


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By Corina Pons | Stock.Market@News.Today

Venezuela’s state-run oil company PDVSA is telling customers of its joint ventures to deposit oil sales proceeds in an account recently opened at Russia’s Gazprombank. PDVSA’s move comes after the United States imposed tough, new financial sanctions on Jan. 28 aimed at blocking Venezuela’s President Nicolas Maduro’s access to the country’s oil revenue.

Supporters of Venezuelan opposition leader and self-proclaimed interim president Juan Guaido said recently that a fund would be established to accept proceeds from sales of Venezuelan oil. The United States and dozens of other countries have recognized Guaido as the nation’s legitimate head of state. Maduro has denounced Guaido as a U.S. puppet seeking to foment a coup.

Today’s Stock Market News – Venezuela Shifts Oil Ventures’ Accounts To Russian Bank
Today’s Stock Market News – Venezuela Shifts Oil Ventures’ Accounts To Russian Bank

PDVSA also has begun pressing its foreign partners holding stakes in joint ventures in its key Orinoco Belt producing area to formally decide whether they will continue with the projects, according to two sources with knowledge of the talks. The joint venture partners include Norway’s Equinor ASA, U.S.-based Chevron Corp and France’s Total SA.

“We would like to make formal your knowledge of new banking instructions to make payments in U.S. dollars or euros,” wrote PDVSA’s finance vice president, Fernando De Quintal, in a letter dated Feb. 8 to the PDVSA unit that supervises its joint ventures.

Even after a first round of financial sanctions in 2017, PDVSA’s joint ventures managed to maintain bank accounts in the United States and Europe to receive proceeds from oil sales. They also used correspondent banks in the United States and Europe to shift money to PDVSA’s accounts in China.

State-run PDVSA several weeks ago informed customers of the new banking instructions and has begun moving the accounts of its joint ventures, which can export crude separately. The decision was made amid tension with some of its partners, which have withdrawn staff from Caracas since U.S. sanctions were imposed in January.


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The sanctions gave U.S. oil companies working in Venezuela, including Chevron and oil service firms Halliburton Co, General Electric Co’s Baker Hughes and Schlumberger NV, a deadline to halt all operations in the South American country.

The European Union has encouraged member countries to recognize a new temporary government led by Guaido until new elections can be held. Europe also has said it could impose financial sanctions to bar Maduro from having access to oil revenue coming from the region. Maduro has overseen an economic collapse in the oil-rich OPEC country that has left many Venezuelans malnourished and struggling to find medicine, sparking the exodus of an estimated 3 million Venezuelans.

Sanctions designed to deprive Maduro of oil revenue have left an armada of loaded oil tankers off Venezuela’s coasts that have not been discharged by PDVSA’s customers due to payment issues. The bottleneck has caused problems for PDVSA to continue producing and refining oil without imported diluents and components.

PDVSA also ordered its Petrocedeno joint venture with Equinor and Total to halt extra-heavy oil output and upgrading due to a lack of naphtha needed to make the production exportable, as the sanctions prohibit U.S. suppliers of the fuel from exporting to Venezuela.


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The deepening turmoil in Venezuela is exacerbating a shortfall of crude oil. Venezuela’s oil occupies a special niche to U.S. refiners’ operations


Today’s Stock Market News


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Venezuela Shortfall Of Crude Oil


By Stephanie Yang and Rebecca Elliott | WSJ.COM

The deepening turmoil in Venezuela is exacerbating a shortfall of dense crude oil, leaving fuel makers in the lurch and underscoring the limitations of U.S. shale.

On Monday, the U.S. imposed sanctions on Venezuela’s state-owned oil giant in an attempt to prevent the proceeds of crude sales to the U.S. from reaching the government of President Nicolás Maduro.

That measure threatens the delivery of more than 500,000 barrels a day of Venezuelan oil to the U.S. Venezuela is the U.S.’s second-largest source of crude imports. While those shipments have roughly halved over the last decade, U.S. producers still will be hard pressed to fill the growing void.

venezuela crude oil
Venezuela Shortfall Of Crude Oil

That is because U.S. shale companies, whose output surpassed expectations and reached record levels last year, produce a crude that is low in sulfur—or “sweet”—and has a low density—“light” in industry parlance. Light, sweet crude is abundant in the U.S., compared with the “heavy,” or dense, oil that countries such as Venezuela provide.

Many American refineries are configured to process a mix of heavy and light barrels and need both kinds to produce fuels like gasoline and diesel efficiently. “The short-term situation could get pretty serious,” said Sandy Fielden, director of oil research for Morningstar Inc. “We’ll see prices for heavier crudes spiking up as any shortage occurs.”

Falling supplies from Venezuela and other exporters, combined with upbeat economic data, pushed U.S. crude-oil futures to a two-month high of $55.26 a barrel last week.

The sanctions on Petróleos de Venezuela SA, or PdVSA, come at a time when heavy crude oil is becoming more scarce. Production in Venezuela has plunged 45% since 2014 amid political and economic turmoil. Canada, another major producer of heavy crude, has experienced severe pipeline bottlenecks that have led to mandated production curbs. Other countries that produce dense crude oil, such as Mexico and Saudi Arabia, have seen their output decline recently as well.

“There are not a lot of countries around that world that have heavy crude,” said Devin Geoghegan, global director of petroleum intelligence at data provider Genscape Inc. By choking off an important oil channel, the sanctions could stifle output from U.S. refiners, which in the past year have churned out record amounts of gasoline supplies, leading to low prices at the pump.

Citgo Petroleum Corp., a PdVSA subsidiary, and Valero Energy Corp. were the two largest U.S. importers of Venezuelan crude last year, according to the U.S. Energy Information Administration, and likely would be hit hardest by a reduction in supplies. They were followed by Chevron Corp. and PBF Energy Inc.

On Thursday, Valero said it was no longer purchasing oil from the country. The company has put alternatives in place and is looking to maximize its intake of lighter, less sulfurous crude, Gary Simmons, a senior vice president, told investors. “But we still have some holes to fill in our supply plan,” Mr. Simmons said. Chevron told investors on Friday that it is pursuing contingency plans.

The Trump administration has played down the domestic impact of the sanctions, with Treasury Secretary Steven Mnuchin saying Monday that the measures would have minimal effect on U.S. gasoline prices. In the near term, plentiful gasoline supplies can help cushion the blow of more-expensive crude. Last week, gasoline futures jumped 2.3%, and diesel futures advanced 1.4%.

“The impact of a Venezuelan crude shortage should have a muted effect on gasoline and diesel prices at least until spring and some of the excess inventory is worked off,” said Charles Kemp, a vice president at energy consulting firm Baker & O’Brien Inc.

But analysts warn that a prolonged shortage of heavy crudes would push refiners to choose between paying a premium for heavy oil and cutting their processing rates. “That will translate necessarily into higher gasoline prices,” Rystad Energy analyst Paola Rodriguez-Masiu said.

As of Thursday, Mexico’s Maya crude, a heavy blend, was trading less than a dollar below Louisiana Light Sweet crude, a Gulf Coast benchmark, compared with an average discount of more than $7.50 last year, according to S&P Global Platts.

Historically, lighter crude has traded at a premium to heavier grades, since it takes less processing to transform it into products like gasoline and diesel. But differences in price between the types have narrowed in recent months as heavy-crude supplies have come under pressure.

Sanctions on Iranian oil sparked worries about dwindling global supplies of heavier crudes last year, before the Trump administration issued waivers in November for countries to continue buying without penalty for 180 days.

Ultimately the sanctions against Venezuelan oil could lead to even steeper reductions in the country’s production, causing a widespread shortage of heavy crude in the global market.


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“The optimistic notion that Venezuelan oil will just go somewhere else is potentially a problem,“ said Robert Campbell, an analyst at research consulting firm Energy Aspects. “There’s an understanding in the industry that the reach of U.S. sanctions goes well beyond U.S. borders.”



 

Venezuela Oil Sanctions Likely to Hit Some U.S. Refiners. Profit margins for turning heavy crude into gasoline and diesel have slumped to the lowest level in more than a year


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By  | Jennifer A Dlouhy

Refiners in Texas and Louisiana would be hard hit by sanctions on Venezuelan crude under consideration at the White House, a move that would leave U.S. oil companies struggling to find alternative supplies.

President Donald Trump recognized Juan Guaido as the interim president of Venezuela on Wednesday in the most provocative move yet against the leftist regime of Nicolas Maduro. Maduro responded by breaking diplomatic relations with the U.S., giving American diplomats 72 hours to leave the country.



The Trump administration has drafted a slate of sanctions but hasn’t decided whether to deploy them, said people familiar with the matter. Earlier this month, White House officials warned U.S. refiners that sanctions were being considered, and advised them to seek alternative sources of heavy crude. Some U.S. refiners worried about sanctions experimented with alternatives last year before ultimately returning to Venezuelan crude.

venezuela oil
Today’s Stock Market News

The hardest-hit would be Citgo Petroleum Corp., the refining arm of Petroleos de Venezuela SA, or PDVSA, the state-run oil company. Citgo imported the most Venezuelan crude in the first 10 months of 2018, followed by Valero Energy Corp.


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Royal Dutch Shell Plc and Phillips 66 haven’t processed Venezuelan crude in their U.S. refineries since the U.S. imposed financial sanctions against the country and PDVSA in August 2017. Marathon Petroleum Corp., Total SA and Motiva Enterprises LLC cut intake by more than a half during that period, and as Venezuelan oil production slumped to the lowest levels seen since the 1940s.

Oil companies have urged the Trump administration not to limit imports of Venezuelan oil, warning the action could disadvantage Gulf and East Coast refiners designed to handle the country’s heavy crude, while also causing gasoline prices to rise.



Shutting off Venezuela imports would exacerbate a drought of the heavy, high-sulfur oil that’s preferred by Gulf Coast refiners and normally sells at a discount to higher-quality crude. Prices are already surging, after OPEC and its allies cut supply and the Canadian province of Alberta forced producers to do the same to stem global and regional gluts. Mars Blend crude rose to a five-year high versus the U.S. benchmark Wednesday, according to data compiled by Bloomberg, while the profit margin for processing Mexican Maya oil sank to the lowest in four years.

Alternatives aren’t readily available. Mexico, whose production is mired in a prolonged slump, has already increased shipments to the U.S. Gulf, surpassing Venezuela last year as the region’s top supplier. Meanwhile, Ecuadorean and Colombian crude often heads to the U.S. West Coast, leaving American refiners competing with each other.

Refiners have told allies in the White House and on Capitol Hill that a unilateral crude oil ban will disadvantage U.S. refiners without advancing U.S. policy objectives in Venezuela, because India, Russia and China will continue buying the country’s oil, according to two people familiar with the discussions.


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Profit margins for turning heavy crude into gasoline and diesel have slumped to the lowest level in more than a year. If refiners can’t find affordable replacements for Venezuelan oil, they may be forced to reduce production rates, according to a person familiar with the matter. That could push up fuel prices, something that the U.S. president has been particularly sensitive to.

Oil headed for its biggest weekly gain in over two years. Still, prices are about 30 percent lower than their highs in October


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Oil headed for its biggest weekly gain in over two years. Futures in New York have advanced 10 percent this week, as Saudi Arabia pledged that a producer coalition it’s leading will keep the market in balance. Still, prices are about 30 percent lower than their highs in October even after a rebound since Christmas Eve thrust crude back into a bull market. That signals investors need reassurance that the group will curb supply sufficiently and demand will hold up.

opec-news-today
Today’s Stock Market News

Crude’s direction in coming weeks may be determined by whether the Organization of Petroleum Exporting Countries and allies including Russia implement output cuts they have promised for the first six months of 2019. Also crucial will be the outcome of trade negotiations between the U.S. and China — the world’s two biggest economies.

A deal between the nations could boost flagging global growth that underpins oil demand. “Oil has had a good rally as Saudi Arabia’s willingness to move forward with cutting output was clearly delivered to the market,” said Hong Sungki, a commodities trader at NH Investment & Securities Co. in Seoul. “But the trade negotiations between the U.S. and China still add some uncertainty to global financial and oil markets, possibly leading to corrections in prices in the shorter term.”

West Texas Intermediate for February delivery traded 20 cents higher at $52.79 a barrel on the New York Mercantile Exchange as of 4:01 p.m. in Singapore on Friday. Futures rose 0.4 percent on Thursday, in their ninth straight daily advance and longest winning streak in nine years.

Brent for March settlement was up 18 cents at $61.86 a barrel on the ICE Futures Europe Exchange in London. It’s risen 8.4 percent this week after gaining 9.3 percent, the most in two years, in the previous week. The global benchmark crude traded at a premium of $8.73 a barrel to WTI for the same month.



Saudi Arabia attempted to assure the market that the production curbs by the OPEC+ coalition will be in place, stating that the world’s top oil exporter has already curtailed its output. The Middle Eastern producer’s energy minister, Khalid Al-Falih, also said that the pledged reductions of 1.2 million barrels a day are “more than sufficient to balance the market.”

While recent progress seen in U.S.-China talks has lifted investor sentiment, global financial markets are still struggling to decipher what exactly may have been promised in their negotiations this week. China’s Ministry of Commerce said on Thursday that the talks between the two sides were “extensive, in-depth and detailed” and laid foundation for a resolution. Chinese Vice Premier Liu He is likely to travel to the U.S. later this month to meet with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.


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Meanwhile, dovish commentary by Federal Reserve Chairman Jerome Powell and his deputy Richard Clarida has added to positive investor sentiment. They said that the central bank will be especially cautious about pushing ahead with interest-rate increases after raising them four times last year.

Oil prices climbed around 3 percent on Wednesday as the extension of U.S.-China talks in Beijing raised hopes that the world’s two largest economies would resolve their trade standoff


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Oil prices climbed around 3 percent on Wednesday as the extension of U.S.-China talks in Beijing raised hopes that the world’s two largest economies would resolve their trade standoff.

U.S. West Texas Intermediate (WTI) crude oil futures (CLc1) were at $51.36 per barrel at 15:00 GMT, up $1.58, or 3.17 percent, the first time this year that WTI has topped $50. International Brent crude futures (LCOc1) were up $1.63, or 2.78 percent, at $60.35 per barrel.

Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang
Today’s Stock Market News

Both crude price benchmarks added to Tuesday’s 2 percent gains and have now been on the rise for eight straight days – their longest rally since June 2017. “After a dreadful December for risk markets, crude oil continues to catch a positive vibe,” said Stephen Innes at futures brokerage Oanda in Singapore, citing tensions between the superpowers which have cast a pall over the world economy.

The trade talks in Beijing were carried over into an unscheduled third day on Wednesday, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased U.S. access to China’s markets.

“Talks with China are going very well!” U.S. President Donald Trump tweeted, without elaborating. State newspaper China Daily said on Wednesday that Beijing was keen to put an end to its trade dispute with the United States, but that any agreement must involve compromise on both sides.

Stephen Brennock, analyst at London brokerage PVM Oil, warned against excessive optimism. “Buyers have placed all their betting chips on the US and China resolving their trade spat,” he said.

“A failure to secure a meaningful breakthrough in the coming days will therefore spark a turnaround in sentiment. It is also worth noting that the global economic outlook continues to darken,” he added.

The World Bank expects global economic growth to slow to 2.9 percent in 2019 from 3 percent in 2018, it said in a semi-annual report released late on Tuesday.



More fundamentally, oil prices have been receiving support from supply cuts started at the end of 2018 by the Organization of the Petroleum Exporting Countries and allies including Russia.

The OPEC-led cuts are aimed at reining in an emerging supply overhang, in part because U.S. crude output surged by around 2 million barrels per day (bpd) in 2018 to a record 11.7 million bpd.


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Official U.S. fuel storage data from the Energy Information Administration is due at 18:00 GMT on Wednesday.

Goldman Sachs downgraded its oil price forecasts for 2019, citing a surge in global production and surprisingly resilient U.S. shale growth


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Goldman Sachs downgraded its oil price forecasts for 2019, citing a surge in global production and surprisingly resilient U.S. shale growth. The investment bank now expects international benchmark Brent crude to average $62.50 a barrel this year, down from a previous forecast of $70.

Meanwhile, U.S. West Texas Intermediate (WTI) is expected to average $55.50 in 2019, down from a prior estimate of $64.50, the investment bank said in a research note published Sunday.

LA PRODUCTION DE PÉTROLE DE L'OPEP A BAISSÉ EN NOVEMBRE
Today’s Stock Market News

“We expect that the oil market will balance at a lower marginal cost in 2019 given: higher inventory levels to start the year, the persistent beat in 2018 shale production growth amidst little observed cost inflation, weaker than previously expected demand growth expectations (even at our above consensus forecasts) and increased low-cost production capacity,” analysts including Damien Courvalin and Jeffrey Currie said.

Last month, OPEC agreed to take 800,000 barrels per day (bpd) off the market from the start of 2019. Pledges from 10 other producers aligned to the influential oil cartel, including Russia, brought total output cuts to 1.2 million bpd.

The aim of the energy alliance‘s production cut is to rein in global oversupply, fueled mostly by the U.S., where production reportedly grew by almost 20 percent to nearly 12 million bpd by the end of 2018. That would make the U.S. the world’s biggest oil producer — ahead of OPEC kingpin Saudi Arabia and non-OPEC heavyweight Russia.

Brent crude traded at around $58.28 on Monday, up around 2 percent, while WTI stood at around $49.07, more than 2.3 percent higher. Oil has gained more than 10 percent since last Monday, notching five consecutive days of price gains in the process.

Meanwhile, financial markets also offered some support for crude futures at the start of the trading week, with investors monitoring a fresh round of trade talks between the U.S. and China.



An ongoing trade war between Washington and Beijing has exacerbated concerns of an economic downturn over the coming months, which would likely hurt demand for oil.


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“The oil market has priced in an excessively pessimistic growth outlook,” analysts at Goldman Sachs said, before adding: “This sets the stage for prices to recover as long as global growth does not slowdown below 2.5 percent.”

Iran says despite U.S. sanctions, it has found new ‘potential’ oil buyers


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Crude Oil News Today


All countries that were granted a waiver from the United States to continue buying a certain amount of Iranian oil imports are complying with U.S. sanctions, a senior Iranian energy official said on Saturday.

The United States withdrew from a nuclear deal with Iran last year and snapped sanctions in place to choke Iran’s oil and banking industries, while temporarily allowing eight customers to keep buying crude from the Islamic Republic.

iran oil
Today’s Stock Market News

“China, India, Japan, South Korea and other countries that were granted waivers from America to import Iranian oil are not willing to buy even one barrel more from Iran,” Amir Hossein Zamaninia, Iran’s deputy oil minister for trade and international affairs, was quoted as saying by the Oil Ministry‘s news agency SHANA.

However, without giving details, Zamaninia said: “Despite U.S. pressures on Iranian oil market, the number of potential buyers of Iranian oil has significantly increased due to a competitive market, greed and pursuit of more profit.”

The 180-day exemptions were also granted to Italy, Greece, Taiwan and Turkey. Washington seeks to bring Iranian oil exports to zero in order to curb Tehran’s missile and nuclear programs and counter its growing military and political influence in the Middle East.



Iran has urged European countries, which are still committed to the nuclear deal, to oppose the sanctions by creating a financial mechanism that facilitates payments of Iranian oil sales.

Oil prices rose on the final day of the year, mirroring gains in stock markets


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By Julia Payne

Oil prices rose about 2 percent on the final day of the year on Monday, mirroring gains in stock markets, but were on track for the first annual decline in three years amid lingering concerns of a persistent supply glut.

Hints of progress on a possible U.S.-China trade deal, with U.S. President Donald Trump saying he had a “very good call” with Chinese President Xi Jinping, helped bolster sentiment for oil.

Brent crude futures was up 83 cents at $54.05 a barrel by 0932 GMT, after rising by over a $1 a barrel in early trade to a high of $54.55 a barrel. U.S. West Texas Intermediate crude futures were at $45.99 a barrel, up 66 cents, or 1.4 percent, from their last close. WTI also rose more than a $1 in early trade, reaching $46.38 a barrel.


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Both contracts are down more than a third this quarter, the steepest decline since the fourth quarter of 2014. For most of 2018, oil prices were on the rise, driven up by healthy demand and supply concerns, especially around the impact of renewed U.S. sanctions against major producer Iran, which were introduced in early November.

Brent crude, seen as a global benchmark for oil prices, rose by almost a third between January and October, to a high of $86.74 per barrel.

That was the highest level since late 2014, the start of a deep market slump amid bulging global oversupply, and many leading analysts and traders at the time said they expected crude to hit $100 per barrel again by the end of 2018.

Instead, Brent prices have wiped out all of 2018’s gains, plunging by almost 40 percent from the year’s high, in what has been one of the steepest oil market sell-offs of the past decades.

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Today’s Stock Market News

The slump came after Washington gave unexpectedly generous sanction waivers to Iran’s biggest oil buyers and as concerns over a global economic slowdown amid the Sino-American trade dispute dented the outlook for oil demand.

“It was the bailout of Iran that really pricked the bubble that was the crude oil market,” said Sukrit Vijayakar, director of energy consultancy Trifecta. “For the immediate future, in the absence of anything new, the first pressure point for oil markets would come around May 2019 or a month or so earlier when the ‘extensions of  (Iran) waivers’ would be discussed.”

The current downward pressure on oil prices should likely taper off from January, analysts said, as the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia start curbing production by 1.2 million barrels per day (bpd).


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The market, however, might still remain under some pressure from swelling production in the United States, which has emerged as the world’s biggest crude producer this year, pumping 11.6 million bpd.

“The key swing producers within OPEC+ do have meaningful spare capacity and are able to use it if they deem it necessary. That said, it is nonetheless a difficult tool to use correctly in a world where forecasters tend to routinely underestimate U.S. production by several hundred thousand barrels per day,” JBC Energy consultancy said in a daily note.

Outside the United States, production in Russia and Saudi Arabia also hit record levels this year.

Oil production from seven major U.S. shale basins is expected to climb to more than 8 million barrels per day (bpd) by the end of the year for the first time


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Oil prices fall for third straight session amid supply glut worries. Oil production from seven major U.S. shale basins is expected to climb to more than 8 million barrels per day (bpd) by the end of the year for the first time, the U.S. Energy Information Administration said on Monday.

Brent crude prices dropped more than $1 on Tuesday, falling for a third straight session, as reports of inventory builds and forecasts of record shale output in the United States, now the world’s biggest producer, stoked worries about oversupply.

Concerns over future oil demand amid weakening global economic growth and doubts over the effectiveness of planned production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) also pressured prices, traders said.


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International benchmark Brent crude oil futures were at $58.62 per barrel at 06:15 GMT, down 99 cents, or 1.66 percent, from their last close. Brent, which has slipped more than 4 percent in the past three sessions, fell to as low as $58.10 a barrel on Tuesday, down more than $1.50 from the previous day’s close.

U.S. West Texas Intermediate (WTI) crude futures were down 91 cents or 1.82 percent at $48.97 per barrel. Both U.S. crude and Brent have shed more than 30 percent since early October due to swelling global inventories, with WTI now trading at levels not seen since October 2017.

“Rising U.S. shale production levels along with a deceleration in global economic growth has threatened to offset OPEC+ efforts as markets weigh the potential of looser fundamentals,” said Benjamin Lu Jiaxuan, an analyst at Singapore-based brokerage firm Phillip Futures.

Market confidence remains extremely delicate amidst looming economic uncertainties as investors contemplate on weaker fuel demand beyond 2018,” he said. Oil production from seven major U.S. shale basins is expected to climb to more than 8 million barrels per day (bpd) by the end of the year for the first time, the U.S. Energy Information Administration said on Monday.

Meanwhile, inventories at the U.S. storage hub of Cushing, Oklahoma, delivery point for the WTI futures contract, rose by more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday.

With oil prices falling, unprofitable shale producers will eventually stop operating and cut supply, although that will take some time, analysts said.

The United States has surpassed Russia and Saudi Arabia as the world’s biggest oil producer, with overall crude production climbing to a record of 11.7 million bpd.

Supply curbs agreed by OPEC and its Russia-led allies might not bring about the desired results, though, as U.S. output goes on increasing and Iran keeps pumping out more oil, analysts said. Some have also expressed doubts over Russia’s commitment to the cuts agreed with OPEC. Oil output from Russia has been at a record high of 11.42 million bpd so far in December.


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“If Russia can be a bystander, it benefits them greatly,” said Hue Frame, portfolio manager at Frame Funds in Sydney. “Although they will see a reduction in profitability, they will gain market share, which is generally more important in the oil market.”

Qatar Petroleum to invest $20 billion in U.S. over the coming few years, after the Gulf Arab state unexpectedly quit OPEC this month


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Qatar Petroleum (QP) is looking to invest at least $20 billion in the United States over the coming few years, its chief executive told Reuters, after the Gulf Arab state unexpectedly quit OPEC this month.

Saad al-Kaabi, who holds the energy portfolio of the world’s top liquefied natural gas (LNG) supplier, also said on Sunday the company aimed to announce foreign partners for new LNG trains needed for an ambitious domestic scale-up by the middle of next year, but was keeping open the possibility of going it alone.

Qatar, a tiny but wealthy country is one of the most influential players in the LNG market due to its annual production of 77 million tonnes. It plans to boost capacity 43 percent by 2023-2024 and will be building four liquefaction trains for the LNG expansion.

As part of its more than $20 billion investment push in the U.S. QP is looking “at gas and oil, conventional and non-conventional,” Kaabi said.

Qatar Petroleum is majority owner of the Golden Pass LNG terminal in Texas, with Exxon and ConocoPhillips (N:COP) holding smaller stakes. Kaabi said he expected to make a final decision on that investment and whether to move ahead with the project “by the end of the year, if not January.”

Qatar is a relatively small oil producer compared to its massive gas production. Its decision to quit OPEC this month was seen as a swipe at the group’s de facto leader Saudi Arabia, which along with the United Arab Emirates, Bahrain and Egypt, has imposed a political and economic boycott on Qatar since June 2017, accusing it of supporting terrorism, which Doha denies.


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Kaabi said that proposed U.S. legislation known as “NOPEC”, or No Oil Producing and Exporting Cartels Act, which could open the OPEC group up to anti-trust lawsuits, was among the reasons for quitting the oil exporting club.

Qatar Petroleum announced separately on Sunday that it was partnering with Italian oil major Eni (MI:ENI) on three oil fields in Mexico, taking a 35 percent stake in deposits that will begin production in mid-2019 and ramp up to about 90,000 barrels per day by 2021.

The company is in talks with international oil firms about the LNG expansion project at home, including Eni, Kaabi said. Other partners already operating in Qatar include Exxon Mobil Corp (N:XOM), Total (PA:TOTF), Royal Dutch Shell (L:RDSa) and ENI (MI:ENI).

QP said it will self-finance the LNG expansion rather than borrow, a shift from previous practices where it used lenders to fund up to 70 percent of project costs.

Kaabi said it could carry out the expansion alone if no good offers from foreign firms were made. “We are looking for a lot of things (in our partners) including asset swaps, things that will help me in my international expansion,” he said. “If I don’t get good deals, nobody will come.”

The company currently pumps 4.8 million barrels of oil equivalent per day (boed) and aims to boost its output to 6.5 million boed in the next 8 years by expanding its upstream business abroad.


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Oil prices edged higher on Thursday, buoyed by a drawdown in U.S. crude stockpiles and indications that the trade war between the United States and China, is easing


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Oil prices edged higher on Thursday, buoyed by a drawdown in U.S. crude stockpiles and indications that the trade war between the United States and China, the world’s two largest economies and the top two oil consumers, is easing.

Crude oil prices have also been supported by OPEC-led supply curbs announced last week, although gains were capped after the producer group lowered its 2019 demand forecast. International Brent crude oil futures (LCOc1) were at $60.36 per barrel at 0733 GMT, up 21 cents, or 0.4 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures (CLc1) were at $51.25 per barrel, up 10 cents, or 0.2 percent.

In a sign that China is willing to lower trade tensions with United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday, helping investors breathe a sigh of relief across broader stock markets, and pushing oil prices up.

A drop in U.S. crude stocks also boosted oil, which has been riding higher on expectations that the OPEC-led planned output cuts would re-balance the market in 2019, analysts said. U.S. crude inventories fell by 1.2 million barrels in the week to Dec. 7, compared with expectations for a decrease of 3 million barrels. [EIA/S]

The agreement of a reduction in output of 1.2 million barrels per day at last week’s OPEC meeting should see the market push into (supply) deficit in H1 2019,” ANZ analyst Daniel Hynes said.

“Rising U.S. output, weaker economic growth and the production cut agreement roll-off will see a balanced market in H2,” Hynes said. ANZ expects Brent to reach $75 a barrel in the first quarter of 2019.

The Organization of the Petroleum Exporting Countries (OPEC) said demand for its crude in 2019 would fall to 31.44 million barrels per day (bpd), 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.

This adds to the concerns of several market watchers that the decision led by the group to cut production might not be enough to override a glut and push prices higher.

A combination of factors such as production cuts by OPEC and non-OPEC producers such as Russia and further sanctions-related declines in Iranian exports, however, would likely keep oil markets tight in the first half of next year, Jefferies analyst Jason Gammel said.



“But… U.S. (production) growth will almost inevitably re-accelerate in 2H19 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into oversupply,” Gammel added.


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The United States, where crude production has hit a record 11.7 million bpd, is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia.

Major oil producers have reached a deal to cut oil production and boost the market, following two days of grueling negotiations


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◊ Major oil producers have reached a deal to cut oil production and boost the market.

◊ The alliance will to take 1.2 million barrels per day off the market.

◊ OPEC has agreed to exempt Iran from cutting production, Iranian Energy Minister Bijan Zangeneh said.


Major oil producers have reached a deal to cut oil production and boost the market, following two days of grueling negotiations and despite opposition from U.S. President Donald Trump. OPEC clinched the deal with allied oil-producing nations including Russia at its headquarters in Vienna, Austria on Friday. The gathering came after deep divisions in the energy alliance were laid bare at a closely-watched meeting on Thursday, with OPEC unable to agree on the terms of crude output cuts.

The alliance will take 1.2 million barrels per day off the market for the first six months of 2019. The 15-member OPEC cartel has agreed to reduce its output by 800,000 bpd, while Russia and the allied producers will contribute a 400,000 bpd reduction.

The deal is in line with expectations for the allies to throttle back output by 1 million to 1.4 million bpd. Brent crude, the international benchmark for oil prices, was trading at $63 a barrel, up 4.9 percent, at 11:15 a.m. ET (16:15 GMT). West Texas Intermediate (WTI) stood at $53.69, around 4.3 percent higher.

The meeting between OPEC and non-OPEC members comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis. Oil prices have crashed around 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.

OPEC began capping supply in partnership with Russia and several other nations in January 2017 in order to end a punishing downturn in oil prices. The alliance reversed course and agreed to hike output in June after it removed more barrels from the market than it intended, largely due to the ongoing freefall in Venezuelan output and supply disruptions in Libya.


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The talks made progress on a critical front on Friday, with Russia agreeing to cut output. The 15-member OPEC group had delayed a decision on how many barrels it would take off the market until Moscow committed to a specific reduction.

Russia will reduce production by 2 percent from October’s output of 11.4 million bpd, equaling about 228,000-230,000 bpd, Russian Energy Minister Alexander Novak said. However, Novak warned that Russia would reduce supply gradually due to climactic conditions that affect its oil fields.

Discussions hit another impasse earlier on Friday because Saudi Arabia had refused to agree to an exemption for Iran, OPEC sources told Reuters. U.S. sanctions against Iran, OPEC’s third-largest producer, have already significantly reduced its exports. Iranian Energy Minister Bijan Zangeneh argued his country should not be forced to cut production in light of the sanctions, which are backed by the Saudis.

Ultimately, OPEC agreed to exempt Iran, along with Venezuela and Libya. The exemptions mean the remaining members will cut production by about 2.5 percent from October levels, said OPEC president and UAE Oil Minister Suhail Mohamed Al Mazrouei.



OPEC rescheduled its mid-year meeting for April so it can review market conditions and adjust its policy if necessary. The alliance did not release specific quotas for individual countries, but top OPEC exporter Saudi Arabia laid out its production path during a press conference.

Oil prices fell on Friday, pulled down by OPEC’s decision to delay a final decision on output cuts


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♦ International Brent crude oil futures fell below $60 per barrel early in the session, trading at $59.50 per barrel at 01:44 GMT.

♦ The OPEC meeting in Vienna ended without an announcement of a decision to cut crude supply.

♦ Oil producers have been hit by a 30-percent plunge in crude prices since October as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil prices fell on Friday, pulled down by OPEC’s decision to delay a final decision on output cuts, awaiting support from non-OPEC heavyweight Russia. International Brent crude oil futures fell below $60 per barrel early in the session, trading at $59.50 per barrel at 01:44 GMT, down 56 cents, or 0.9 percent from their last close. U.S. West Texas Intermediate (WTI) crude futures were at $51.24 per barrel, down 25 cents, or 0.5 percent.

The declines came after crude slumped by almost 3 percent the previous day, with the Organisation of the Petroleum Exporting Countries (OPEC) ending a meeting at its headquarters in Vienna, Austria, on Thursday without announcing a decision to cut crude supply, instead preparing to debate the matter on Friday.


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“OPEC has decided to meet Friday again…(as) Russia remains the sticking point,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore. Analysts still expect some form of supply reduction to be decided.

“We are beginning to witness the outline of the next iteration of production cuts, with OPEC conforming to cut its own production by around 1 million barrels per day, with the cartel lobbying non-OPEC members to contribute more,” Japanese bank MUFG said in a note.

Supply surge, price plunge. Oil producers have been hit by a 30-percent plunge in crude prices since October as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption.

That increase alone is equivalent to the output of major OPEC producer the United Arab Emirates.

The surge is largely down to soaring U.S. crude oil production, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the United States the world’s biggest oil producer.



As a result, the United States last week exported more crude oil and fuel than it imported for the first time on records going back to 1973, according to data released on Thursday.

OPEC and Russia poised to impose steep production cuts despite US pressure


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> OPEC meets at its headquarters in Vienna, Austria, with the aim of reaching an accord over production levels for the next six months.

> The 15-member organization will then hold talks with allied non-OPEC partners on Friday, with markets widely-expecting the energy alliance to announce steep output reductions from January.

> Oil prices have crashed more than 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.


OPEC and its allies are expected to agree on the terms of price-boosting output cuts on Thursday, despite pressure from President Donald Trump to reduce the cost of crude.

The influential oil cartel meets at its headquarters in Vienna, Austria, with the aim of reaching an accord over production levels for the next six months. The 15-member organization will then hold talks with allied non-OPEC partners on Friday, with markets widely-expecting the energy alliance to announce steep output reductions from January.

The much-anticipated meeting comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis. Oil prices have crashed around 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.


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International benchmark Brent crude was trading at $61.28 a barrel at around 8:15 a.m. London time, down around 0.5 percent, while West Texas Intermediate (WTI) stood at $52.63, more than 0.4 percent lower.

What’s going to happen?. OPEC kingpin Saudi Arabia has been leading calls for the group to trim output, amid surging supply and fears that an economic slowdown will erode fuel demand. The oil-rich kingdom has indicated it wants the group to curb output by at least 1.3 million barrels per day.

But, Russia has appeared reluctant to sign off on a reversal in production strategy. The non-OPEC heavyweight has warned the energy alliance must tread carefully this week to ensure it does not change course by 180 degrees whenever it meets.

On Thursday morning, OPEC was thought to be waiting on Russia before deciding the exact level of production cuts. Five unnamed delegates told Reuters ahead of the meeting that the group’s preferred level of supply cuts would effectively be conditional on Moscow’s contribution.

The likely outcome is OPEC and non-OPEC members agree to a supply cut of around 1.2 million to 1.4 million barrels per day. As always though, the hard part for the energy alliance is not figuring out a number, but rather how the group divvies up the cuts.

OPEC began managing crude supply in partnership with Russia and several other nations last year in order to end a punishing downturn in oil prices.

The Middle East-dominated group produces around 40 percent of the world’s oil and has a long history of adjusting production to guide the energy market. The energy alliance’s policy of capping output has drawn particular ire from Trump.



Donald J. Trump. Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!. The U.S. president is publicly in favor of low fuel prices and has urged Saudi Arabia to drive crude futures even lower at OPEC’s final meeting of the calendar year.

A magnitude 7 earthquake struck Alaska early Friday, shutting the state’s most important oil pipeline


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A magnitude 7 earthquake struck Alaska early Friday, shutting the state’s most important oil pipeline and potentially threatening crude exports. The temblor struck 13 kilometers north of Anchorage. The Alaska pipeline that carries crude from the Arctic coast to the marine terminal in Valdez was shut as a precaution, Michelle Egan, spokeswoman for Alyeska, said by phone.

Egan said she wasn’t aware of any damage to the line, which transported 530,000 barrels on Thursday, but said there isn’t yet a timeline on restart.

Alaska Air Group Inc. said it temporarily suspended operations at the Anchorage airport following the quake. “We understand there’s considerable damage being reported” at the airport, the company said in a statement. There was one oil tanker at the Anchorage port, the Pacific Beryl, which was delivering jet fuel from South Korea to ports in Alaska.

Alaska produced 494,000 barrels of oil a day last year, with most of it sent down the Alaska pipeline to Valdez, where it’s shipped out by tanker, usually to U.S. West Coast refineries. No tankers were at the terminal when the quake struck and “everything is fine down there,” Egan said. A few smaller vessels were moved away from the shoreline.

Alaskan oil production began to rise two years ago after almost three decades of declines from a peak of more than 2 million barrels a day in 1988, according to U.S. Energy Department data. The state was the sixth-largest oil producer in the U.S. in September down from third last year. It trailed Colorado, Texas, New Mexico, Oklahoma and North Dakota, states that have experienced a boom in shale fracking in the past decade.


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The recent uptick in production came amid new investments along the arctic coast and a push by President Donald Trump to expand drilling in the state. The U.S. administration is moving to expand the territory open for oil exploration in Alaska’s National Petroleum Reserve, a process that could shift drilling rigs closer to herds of caribou and flocks of threatened birds.

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In October, ConocoPhillips received approval to develop its Greater Mooses Tooth 2 project just a week after announcing the first production from the Greater Mooses Tooth 1 development.

Hilcorp Energy Co. operates oil platforms in Cook Inlet, not far from Anchorage, while Marathon Petroleum Corp. has a 63,000 barrel-a-day refinery in nearby Kenai. Neither company immediately responded to requests for comment.

Oil prices underwent a selloff on Thursday with U.S. crude falling below the $50 a barrel level for the first time in more than a year


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Oil prices underwent a selloff on Thursday with U.S. crude falling below the $50 a barrel level for the first time in more than a year amid persistent concerns about oversupply. New York-traded West Texas Intermediate crude futures fell 47 cents, or 0.93%, at $49.82 a barrel by 4:45 AM ET (9:45 GMT). That was its lowest level since Oct. 9, 2017. Brent crude futures, the benchmark for oil prices outside the U.S., traded down 74 cents, or 1.25%, to $58.35, after hitting its lowest level since Oct. 24, 2017.

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Prices came under renewed selling pressure after data on Wednesday showing that U.S. crude inventories increased again last week, hitting their highest levels in more than a year. In its weekly report, the Energy Information Administration said oil stockpiles increased by 3.57 million barrels to 450 million barrels.

Prices also remained under pressure after Russian President Vladimir Putin indicated that he is comfortable with current levels, casting doubt on OPEC’s ability to move ahead with significant production cuts. Putin said Wednesday that prices of around $60 per barrel were “absolutely fine” as the Russian budget would be balanced at $40.


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Saudi Arabia has been pushing OPEC and its non-OPEC allies, led by Russia, to agree to reduce production given the more than 30% decline in prices since last October.

Analysts believe that the group will announce a reduction of 1.1 million barrels per day when they meet in Vienna on Dec. 6-7. With the U.S. and Saudi Arabia producing at record levels and rising inventories in the U.S., investors have been concerned that OPEC will be unable to counteract increasing supply.

Traders will keep an eye on this weekend’s G20 summit where Putin is expected to meet on the sidelines with Saudi Arabia’s Crown Prince to discuss plans for output.

“We are now in contact with OPEC and if needed, we will continue this joint work,” Putin said referring to the current agreement to help stabilize markets.


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In other energy trading, gasoline futures dropped 0.74% to $1.3659 a gallon by 4:51 AM ET (9:51 GMT), while heating oil lost 0.70% to $1.8223 a gallon. Natural gas futures traded down 1.87% to $4.611 per million British thermal units

Oil prices plunged to their lowest since late 2017 on Friday in choppy trading, weighed down by an emerging crude supply overhang and a darkening economic outlook


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Oil prices plunged to their lowest since late 2017 on Friday in choppy trading, weighed down by an emerging crude supply overhang and a darkening economic outlook. To counter bulging supply, the Organization of the Petroleum Exporting Countries (OPEC) is expected to start withholding output after a meeting planned for Dec. 6.

International benchmark Brent crude oil futures fell their lowest since December 2017 at $61.52 per barrel, before recovering to $62.13 by 0741 GMT. That was 47 cents, or 0.8 percent below their last close. U.S. West Texas Intermediate (WTI) crude futures slumped 2.3 percent, to $53.38 a barrel. Prices earlier fell to as low as $52.82, only 5 cents about the $52.77 level reached on Tuesday, which was the lowest since October 2017.



Amid the plunge, Brent and WTI price volatility has jumped in November to approach levels not seen since the market slump of 2014-2016 and, before that, the financial crisis of 2008-2009.


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The divergence between U.S. and international crude comes as surging North American supply is clogging the system and depressing prices there, while global markets are somewhat tighter, in part because of reduced exports from Iran due to newly imposed U.S. sanctions.

Overall, however, global oil supply has surged this year, with the top-three producers – the United States, Russia and Saudi Arabia – pumping more than a third of global consumption, which stands at around 100 million barrels per day (bpd).

The market is currently oversupplied,” said U.S. investment bank Jefferies on Friday, adding that “an oversupplied market has a difficult time setting a (price) floor.” High production comes as the demand outlook weakens on the back of a global economic slowdown.

Shanghai stocks fell the most in five weeks on Friday, by 2.5 percent, amid worries over China’s economic growth and doubts over the chances of President Xi Jingping and U.S. President Donald Trump achieving a de-escalation in the Sino-U.S. trade war when they meet next week.



Oil prices have plunged by around 30 percent since their last peaks in early October, as global production started to exceed consumption in the fourth quarter of this year, ending a period of undersupply that started in the first quarter of 2017, according to data in Refinitiv Eikon. Adjusting to lower demand, top crude exporter Saudi Arabia said on Thursday that it may reduce supply.

“We will not sell oil that customers don’t need,” Saudi Energy Minister Khalid al-Falih told reporters. Saudi Arabia is pushing OPEC to cut oil supply by as much as 1.4 million bpd to prevent a supply glut.



 

The group officially meets on Dec. 6 to discuss its supply policy. U.S. bank Morgan Stanley (NYSE:MS) said it saw “a far greater probability that OPEC reaches an agreement to balance the market in 2019” than not, adding that this would likely support oil prices “in the high-$50s, at least near term.”

It’s a volatile time for oil, with crude prices up 4% after a 7% plunge just a day earlier. Some warn, however, that a bull trap might be forming with the market’s latest rebound.


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WTI was up $1.93, or 3.61%, at $54.36 per barrel by 12:35 PM ET (16:35 GMT). In Monday’s session, it fell around 7% to a 13-month bottom of $52.77. Brent, the global benchmark for oil, rose $1.36, or 2.17% to $63.89. On Monday, it hit a nine-month bottom of $61.73.

Both rose more than 1% in early Wednesday trade on estimates by industry group American Petroleum Institute of a drawdown in crude stockpiles last week instead a build. The previous session’s 7% slide also prompted some short-covering and bargain-hunting for crude, traders said.

But what few anticipated was the market extending gains after the U.S. Energy Information Administration (EIA) showed a ninth-straight week of crude builds last week, and more than forecast. “It’s a surprise on a few different fronts,” said Tariq Zahir, managing member at New York’s Tyche Capital Advisors.

“We feel the gains we see today will be limited and could reverse, especially if a risk-off attitude develops and the dollar gets some strength,” said Zahir, who expects U.S. crude futures to break below its landmark $50 support soon.


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The EIA data showed that crude oil inventories increased by 4.85 million barrels in the week to Nov. 16, vs. a forecast build of 2.5 million barrels.

The report also showed that gasoline inventories fell by 1.30 million barrels, compared to expectations for a draw of 0.2 million barrels, while distillate stockpiles dropped by just 0.08 million barrels, compared to forecasts for a decrease of 2.75 million.


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“The crude build aside, the real eye opener was the smaller-than-expected draw in distillates, which basically tantamounts to a no-draw, surprising given the cold spell we currently have in the Midwest and East Coast,” Zahir said.

Most traders have a bleak outlook for oil despite OPEC hinting over the past week that it might decide to cut production by as much as 1.4 million barrels per day when it meets in Vienna on Dec. 6. Many dispute such a wide cut happening as OPEC leader Saudi Arabia has only offered to reduce 0.5 million bpd on its own and would need non-member Russia’s cooperation for the balance, a plan Moscow has resisted so far.



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President Donald Trump’s persistent calls on OPEC not to cut production and to keep oil prices low has also weighed on the market as the U.S. president is seen as key for Saudi Arabia to avoid sanctions for its alleged role in the murder of Saudi-born U.S. resident and journalist Jamal Khashoggi.

“I think we have a very noisy couple weeks ahead of us, and a volatile market that is making it increasingly difficult to express a view in a limited loss format,” said Elliot Klapper, managing director for commodities at Goldman Sachs (NYSE:GS), in a note to clients.

Oil prices drop as a deteriorating economic outlook and a surge in U.S. production outweighed expected supply cuts by the OPEC


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“Upside potential has shown to be shaky as bullish movements lose steam,” said Benjamin Lu of Singapore-based brokerage Phillip Futures. Oil prices are almost a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States. U.S. crude oil production has soared by almost 25 percent this year, to a record 11.7 million barrels per day (bpd).

That comes amid widespread market expectations of an economic slowdown, which saw Asian stock markets tumble on Tuesday, adding to sharp losses on Wall Street the previous day. As a result, financial traders have become wary of oil markets, seeing further price downside risks from the growth in U.S. shale production as well as the deteriorating economic outlook.

Portfolio managers have sold the equivalent of 553 million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.



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Funds now hold a net long position of just 547 million barrels, less than half the recent peak of 1.1 billion at the end of September, and down from a record 1.484 billion in January. Concerned about an emerging production overhang similar to the one that led to a price slump in 2014, OPEC is pushing for a supply cut of 1 million to 1.4 million bpd.

“We expect OPEC to agree to a supply cut at its next official meeting on 6 December,” French bank BNP Paribas (PA:BNPP) said. The bank added that it expected Brent to recover to $80 per barrel before year-end. “In 2019, we expect WTI to average $69 per barrel and Brent $76 per barrel,” BNP said.

The International Energy Agency (IEA), which represents the interest of oil consumers, on Monday warned OPEC and other producers of the “negative implications” of supply cuts, with many analysts fearing that a spike in crude prices could erode consumption.

More New On Crude Oil : U.S. government deals allowing hundreds of thousands of barrels a day of Iranian oil to flow onto world markets are driving down prices.

After the Trump administration threatened a complete halt to Iranian oil exports, prompting other producers to boost output to compensate, the U.S. authorized exemptions to eight countries without disclosing the terms.


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Washington’s deals letting Tehran sell hundreds of thousands of barrels of oil prompts kingdom to advocate production cut, against Trump’s wishes. U.S. government deals allowing hundreds of thousands of barrels a day of Iranian oil to flow onto world markets are driving down prices and putting Saudi Arabia on a collision course with Washington as the kingdom scrambles to cut supply.

After the Trump administration threatened a complete halt to Iranian oil exports, prompting other producers to boost output to compensate, the U.S. authorized exemptions to eight countries without disclosing the terms. American officials now are forecasting a cut to Iranian crude sales by April of at least 40% to 900,000 barrels a dayfrom the country’s pre-sanctions level, say people familiar with the sanctions waivers.



 

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The shifts are whipsawing oil markets and sparking U.S.-Saudi tensions. While Saudi Arabia wants to trim production to boost oil prices to about $80 a barrel in support of its economy, Saudi advisers say, President Trump warned against a production cut and called for lower prices. Continue To Read…

U.S. government deals allowing hundreds of thousands of barrels a day of Iranian oil to flow onto world markets are driving down prices


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Washington’s deals letting Tehran sell hundreds of thousands of barrels of oil prompts kingdom to advocate production cut, against Trump’s wishes. U.S. government deals allowing hundreds of thousands of barrels a day of Iranian oil to flow onto world markets are driving down prices and putting Saudi Arabia on a collision course with Washington as the kingdom scrambles to cut supply.

After the Trump administration threatened a complete halt to Iranian oil exports, prompting other producers to boost output to compensate, the U.S. authorized exemptions to eight countries without disclosing the terms. American officials now are forecasting a cut to Iranian crude sales by April of at least 40% to 900,000 barrels a day from the country’s pre-sanctions level, say people familiar with the sanctions waivers.

The shifts are whipsawing oil markets and sparking U.S.-Saudi tensions. While Saudi Arabia wants to trim production to boost oil prices to about $80 a barrel in support of its economy, Saudi advisers say, President Trump warned against a production cut and called for lower prices.

Saudi oil officials say they are considering advocating a production cut of as much as 1.4 million barrels a day at the Organization of the Petroleum Exporting Countries’s next meeting on Dec. 6. But OPEC officials say they are having difficulty calculating how much to produce due to the U.S. secrecy on its Iran sanctions efforts. That opacity, they say, already tripped up an OPEC-Russia alliance formed to pump extra oil into markets to stabilize supplies and prices.

In just over a month, Brent—the global benchmark—fell more than 21%. The administration isn’t saying how much Iranian oil the eight countries are allowed to buy. The countries have negotiated limits in secret, bespoke deals with the U.S. The lack of detail about the size of the waivers is “confusing for markets,” said Sara Vakhshouri, president of Washington-based consulting firm SVB Energy International.

Buyers too are withholding details of their agreed-to reductions. “It’s confidential,” India’s oil minister Dharmendra Pradhan said when asked about his country’s deal with Washington. U.S. officials say they won’t disclose their agreements with Iran’s oil buyers because they fear complaints that some were asked to cut more than others.

“We do not discuss the private diplomatic discussions that led to agreements with the various jurisdictions on the volume of oil imports,” a State Department spokesperson said. The Trump administration’s sanctions are aimed at containing the Islamic Republic’s regional influence and military capabilities, a goal Saudi Arabia shares.



But Saudi officials say they feel betrayed by the Trump administration’s lack of candor around the sanctions and are going to chart an oil policy that is more independent of American goals. They say Mr. Trump strong-armed Prince Mohammed into throttling up oil output to record levels to cool off prices ahead of the revival of tough sanctions on Iran’s petroleum industry on Nov. 5.

Mr. Trump told Saudi leaders there would be no exceptions from sanctions for Iranian oil buyers, the officials said, which would have potentially wiped over a million barrels of oil off the market and sent prices soaring. And if the Saudis didn’t raise production to make up for Iranian losses, Mr. Trump threatened to support a congressional bill allowing antitrust action against OPEC members, who he says act as a cartel, the advisers said.

Instead the Trump administration issued the exemptions—a move that relieved market worries about Iran’s supply outages and has sent oil prices skittering over the past week. “They feel they were used,” said a Saudi adviser of the kingdom’s leaders. The White House referred questions to the State Department, where officials pointed to comments Secretary of State Mike Pompeo made on Nov. 1.

The Kingdom of Saudi Arabia has been a great partner with us in pushing back on the Iranian regime in an effort to change its behavior by assisting and ensuring that there is sufficient crude oil in the marketplace,” Mr. Pompeo said.

Crown Prince Mohammed bin Salman’s attention has turned to his oil-dependent economy as the kingdom’s leadership faces its biggest crisis in a generation with the murder of journalist Jamal Khashoggi in Istanbul by a group of Saudi government operatives. In just over a month, oil prices have fallen far below the $88 a barrel that the International Monetary Fund says Saudi Arabia needs to balance its budget.

“Saudi Arabia has major financial commitments to meet and price drops don’t help. $80 a barrel is a sweet spot for the government,” said a senior Saudi energy adviser.



A strong economy is important as the kingdom wages an expensive war in Yemen and girds for an economic showdown with Iran. Oil revenue is even more important now, as the fallout from Mr. Khashoggi’s death has complicated Prince Mohammed’s attempts to ramp up non-petroleum sectors, said Adel Hamaizia an associate Middle East fellow at London’s Royal Institute of International Affairs.

The uproar has brought a “cocktail of problems,” said Mr. Hamaizia, a former Saudi government adviser. He said Saudi Arabia could postpone economic reforms, such as phasing out fuel subsidies, to lure industrial investors.

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More News On Crude Oil. Saudi Arabia, Others Inch Closer to Oil Output-Cut Pact. Saudi representatives said Sunday that the kingdom would slash its exports unilaterally next month, as a broader OPEC alliance debated — but didn’t agree to— a collective production cut.  Meanwhile, Russia, the world’s largest producer, sent mixed signals on whether it would pull back on supply—after moving in lockstep on such matters with OPEC for more than two years.

Russia’s oil minister Alexander Novak said he was open to crude production cuts if the coalition reaches a consensus, and would adhere to any decision it makes. But he also said Russian production had “reached a certain level where we have stabilized and we will be fluctuating around that level in coming months.”

Saudi Arabia, Russia and other producers met here in the United Arab Emirates capital over the weekend to debate whether reductions of about one million barrels a day might be necessary next year, with a decision expected at an OPEC meeting next month.

Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, and Russia, which heads an alliance of producers outside the cartel, agreed to boost production at a meeting in June over fears U.S. sanctions on Iran would trigger shortages.



Oil prices extended declines after the U.S. said last week that it would allow eight countries to continue buying sanctioned Iranian crude.

The U.S. oil market is scrambling to adjust to a deep selloff over the last several weeks


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The U.S. oil market is scrambling to adjust to a deep selloff over the last several weeks, with forward prices signaling a supply glut which could upend plans for producers and traders through 2019.

U.S. crude futures (CLc1) plunged 7 percent on Tuesday, to settle at $55.69, their lowest level this year, down from a four-year high only a month ago. Tuesday marked a 12th straight session of declines, which is the longest losing streak on record, shaking a market that was bracing for supply shortfalls just a month ago.

“We were definitely in the bullish narrative for the past three months, and now we’re seeing that narrative shift,” said Michael Cohen, head of energy markets research at Barclays (LON:BARC). “If the narrative gets unwound or undermined, so, too, does the positioning by the market.”



In the biggest sign of the shift, an increasing number of later-dated futures contracts are trading at a premium to current prices. That is a signal that the market expects supply to outpace demand next year and into 2020.

That trend could inhibit producers from drilling and deal a blow to shale companies, which have raked in profits as U.S. production surged to a weekly record of 11.6 million barrels per day (bpd) in early November. Already, the Organization of the Petroleum Exporting Countries is considering a production cut to boost prices. Adding to concerns, the International Energy Agency said on Wednesday that supply will outpace demand in 2019.

“I think there’s a genuine shift,” one trader at a top commodities merchant said. “Everyone is talking about global oil builds in 2019.”


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Many traders saw $100 oil on the horizon just a month ago, but oil is now closer to $50 a barrel. U.S. production is expected to surpass the 12 million bpd milestone by mid-2019, according to U.S. Energy Information Administration forecasts. As prices fall and market structure weakens, U.S. shale producers may pare their drilling plans for 2019, said R.T. Dukes, research director for U.S. lower 48 upstream at Wood Mackenzie. “I think, instead of a big ramp-up into next year, we get flatter activity than what we might have seen otherwise,” he said.

Still, any changes would take time to alter the trajectory of production, especially as the largest oil companies, including Exxon Mobil Corp (N:XOM) and Chevron Corp (N:CVX), are increasing activity in U.S. shale plays. The weakening in 2019 contracts pushes the market’s structure, or curve, more firmly into contango, where forward prices are higher than spot prices.



Contango is a symptom of an oversupplied oil market or rising levels of inventories. It makes it more profitable for crude traders to store large volumes of oil for later, rather than sell for immediate use. The spread between U.S. crude futures expiring in December 2019 and December 2020 , a popular trade in oil markets, flipped from a premium to a discount of about 42 cents on Tuesday. It is the first time the spread traded in negative territory since October 2017.

U.S. crude for delivery in December 2018 plunged to trade as much as $1.43 a barrel below futures for delivery in June 2019 last week, the widest spread on record. The December 2018 contract dropped to trade as much as $2.10 per barrel below the December 2019 contract last week, the widest since early 2016.



A change in the market structure has ramifications for investors as well. When far-dated contracts trade below the spot price, funds and other investors benefit from what is known as “positive roll yield.”

In that situation, funds holding a contract shift into the next month’s contract before it expires, profiting from buying the cheaper later-dated futures. But with those contracts now more expensive, rolling the long positions forward is less lucrative and is one reason why traders have pulled back on bullish bets.

Today’s Stock Market News – A majority of OPEC and allied oil exporters support a cut in the global supply of crude


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OPEC and allied oil exporters support a cut in the global supply of crude, Oman Oil Minister Mohammed bin Hamad al-Rumhi said on Sunday. “Many of us share this view,” the minister said when asked about the need for a cut. Asked if it could amount to 500,000 or one million barrels per day, he replied: “I think it is unfair for me to throw numbers now.”

He was speaking in Abu Dhabi where an oil market monitoring committee was held on Sunday, attended by top exporters Saudi Arabia and Russia. “We need a consensus,” he said, indicating that non-OPEC Russia would need to approve any decision. Oman is also not a member of the Organization of the Petroleum Exporting Countries.

Saudi Arabia is discussing a proposal to cut oil output by up to 1 million barrels per day by OPEC and its allies, two sources close to the discussions told Reuters on Sunday. The sources said the discussions were not finalized as much depended on the reduction in Iranian exports.



“There is a general discussion about this. But the question is how much is needed to reduce by the market,” one of the sources said, speaking in Abu Dhabi where a market monitoring committee is due to be held on Sunday, attended by top exporters Saudi Arabia and Russia. Asked by reporters in Abu Dhabi if the market is in balance, Saudi Energy Minister Khalid Al-Falih said: “We will find out. We have our meeting later.”

Al-Falih last month said there could be a need for intervention to reduce oil stockpiles after increases in recent months. The United States this month imposed sanctions curtailing Iran’s oil exports as part of efforts to curb Tehran’s nuclear and missile programs as well as its support for proxy forces in Yemen, Syria, Lebanon and other parts of the Middle East.


More News On OPEC. Producers face a supply glut, despite the return of sanctions against Iran. Surging shale means the group will have to extend output cuts. It was meant to be a short, sharp shock. Instead, OPEC members are facing a long, slow grind with no end in sight.



The deal reached with several non-OPEC countries in 2016 to cut oil supply and drain excess inventories was meant to last just six months. But after last week’s ugly slide into a bear market for prices, the agreement looks likely to drag into a third year as the group faces having to make further cuts in 2019.

Taking 1.8 million barrels a day of oil off the market from January 2017 was meant to drain excess inventories by the middle of that year, restore prices to an undefined “acceptable” level and balance supply and demand. Instead, the glut persisted. Although better than expected, compliance with the agreement was not complete and it was not until the deal was extended and Saudi Arabia started cutting shipments to the U.S. in the middle of 2017 that prices really began to pick up.

A further extension to the deal helped to push prices up to $80 a barrel by mid-2018, earning tweeted rebukes from President Donald Trump that prompted a relaxation of the cuts and a surge in supply from those with the capacity to do so — principally Saudi Arabia and Russia. Total OPEC output is now the highest since before the cuts were introduced, even after allowing for changes in membership, while Russia’s hit a post-Soviet high of 11.4 million barrels a day last month.


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But the recovery in oil prices has been a double-edged sword for OPEC and friends. Sure, it has boosted revenues for most — Venezuela and soon Iran being the exceptions — but it has also lit a fire under U.S. shale oil production.

Stock Market News – OPEC and its allies led by Russia are weighing production cuts to halt a sharp slump in oil prices


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OPEC and its allies led by Russia are weighing production cuts to halt a sharp slump in oil prices during meetings being held this weekend in Abu Dhabi. Ministers from Saudi Arabia and Russia will lead key monitoring committee meetings due to start in the UAE capital on Sunday with output policy high on the agenda.

Their deliberations are being complicated by surging US shale output and waivers granted to eight customers of Iranian oil, which have helped drive Brent crude below $70/b. “We are worried about the situation of the market, the global economy, the demand and supply,” one delegate said as he left an advisory committee meeting Saturday.

OPEC and 10 non-OPEC partners led by Russia have boosted production since agreeing in June to increase supplies by a combined 1 million b/d from May levels to offset expected losses by sanctions-hit Iran and economically strained Venezuela. However, weaker market conditions have put the need to restrain output back on the group’s agenda.



NYMEX WTI futures have declined for 10 straight days, equaling the index’s longest losing streak and closing Friday at a 2018 low of $60.19/b. OPEC sources have indicated that the monitoring committee may recommend that the production increase be reversed and cuts reinstated. “The market has changed a lot in a short period of time,” another delegate said.

OPEC production has risen 820,000 b/d since May, according to the latest S&P Global Platts OPEC survey of analysts, industry officials and shipping data. Meanwhile, Russia reported earlier this month that it hit an all-time high of 11.41 million b/d in October, up about 440,000 b/d from May.



This comes as the US Energy Information Administration estimated that US output also hit a record high of 11.4 million b/d in October. Analysts with PVM Associates said in a note Friday that the price slump appears likely to continue, unless OPEC and its partners agree to cut production.

“Barring a U-turn in OPEC/non-OPEC production strategy, nuggets of price support will be sporadic at best and will provide little in the way of upside potential,” they said. The monitoring committee meeting is scheduled to start at 5:00 pm local time (1300 GMT). The committee comprises ministers from Saudi Arabia, Russia, Kuwait, Venezuela, Algeria and Oman. UAE energy minister Suhail al-Mazrouei, who holds the rotating OPEC presidency this year, is hosting the meeting.

More News On Crude Oil
Oil Short-Sellers Make a Comeback as OPEC Moves to Center Stage. The oil bears are back, and they’re looking at OPEC before making their next move. While money managers slashed bets on rising West Texas Intermediate crude prices for a ninth week in their longest retreat on record, short-selling jumped to the highest in more than a year. The rapid shift in sentiment sets the stage for an OPEC meeting on Sunday to discuss market conditions.



Investors will be waiting to see whether OPEC provides any indication that the group will trim production once again next year as futures plunge. A change in policy would follow President Donald Trump’s calls on the cartel to lower oil prices and ramp up output to make up for lost crude from Iran due to U.S.-imposed sanctions.

Among the reasons for the bearishness that has roiled the oil market are OPEC production at the highest since 2016, record U.S. output and waivers given to a number of importers of Iranian crude, including China.

Stock Market News – WTI has wiped out all of its gains for 2018. Oil touched the lowest level since February as it headed for the longest losing streak on record.


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WTI has wiped out all of its gains for 2018. The decline has been exacerbated by a U.S. decision to grant eight countries waivers to continue importing from Iran.


Crude Volatility: The History and the Future of Boom-Bust Oil Prices (Center on Global Energy Policy Series)


Futures in New York fell as much as 2.3 percent extending their losses to a 10th day. Prices are down more than 20 percent from a four-year high reached in early October. The drop comes two days before OPEC countries will meet with partners in Abu Dhabi, after signaling it may cut output again next year. Oil may get support as refiners return from seasonal, maintenance, boosting demand.



“I think refinery utilization rates are going to climb and when they do, that depletes crude inventories,” said Thomas Finlon, director of Energy Analytics Group LLC.

WTI has wiped out all of its gains for 2018. The decline has been exacerbated by a U.S. decision to grant eight countries waivers to continue importing from Iran, which it slapped with sanctions earlier this week. That decision, coupled with pledges by Saudi Arabia to pump more and gains in American supply, have turned fears of a supply crunch into talk of an oversupply.

“The focus is on negative sentiment in oil and negative momentum,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “It’ll be interesting to see if some stick with their shorts over the weekend with the OPEC meeting.”



West Texas Intermediate for December delivery fell 50 cents to $60.16 a barrel at 11:26 a.m. on the New York Mercantile Exchange. The contract is headed for about a 4 percent loss for the week and a fifth weekly decline. Total volume traded was 65 percent above the 100-day average. Brent futures for January settlement fell 62 cents to $70.03 a barrel on the London-based ICE Futures Europe exchange. Prices are also on course to fall for a fifth week. The global benchmark crude traded at a $9.72 premium to WTI for the same month.

A potential agreement by OPEC to return to output cuts would mark the second production U-turn for the group this year. For Saudi Arabia — the world’s biggest crude exporter — it would be the third time in recent years that the kingdom has delivered a supply surge only to quickly reverse it.

The decline comes after global oil supply has surged. U.S. crude production increased to a record 11.6 million barrels a day last week, according to Energy Information Administration data.



OPEC’s output in October reached the highest level since 2016, while Russia last month pumped 11.4 million barrels a day, a post-Soviet record. Producers meeting this weekend will have to contend with not only the threat of a glut, but also the risk to demand from faltering emerging-market economies and a trade war between the U.S. and China.

Stock Market News – Oil prices declined for a ninth straight session, bringing it 20% below its recent high


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U.S. oil prices traded in bear market territory intraday Thursday, with prices declining for a ninth straight session on worries over rising U.S. crude oil inventories and concerns of a global supply surplus that could overwhelm demand.

The market entered an intraday bear market when prices fell below $61.13 a barrel, dropping as low as $60.83 a barrel. Prices have since moved back slightly above the bear-market level. Light, sweet crude for December delivery was recently 0.5% lower at $61.32 a barrel on the New York Mercantile Exchange. Brent crude was down 0.9% at $71.45 a barrel.

Bear Market: A bear market generally is defined as a 20% decline from a recent peak, which in the case of the U.S. crude oil benchmark was a four-year high of around $76 a barrel reached on Oct. 3. Prices have fallen steadily since then, fueled by a U.S.


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government decision to soften oil sanctions on Iran. The market entered an intraday bear market Thursday morning in New York, when prices fell below $61.13 a barrel. Crude has closed lower for the past eight sessions through Wednesday, which is the longest losing streak since July 2014, when the yearslong oil downturn was just beginning.

EIA Data: One of the key factors in oil’s decline this week was the Energy Information Administration’s weekly inventory report released Wednesday. It showed that U.S. oil inventories rose for a seventh straight week to 432 million barrels, the most since June, and that crude oil production in the U.S. reached a record high. “The weekly EIA data release painted a rather bearish picture,” said JBC Energy. “Production rose to a fresh record high of 11.6 million barrels a day, up a massive 400,000 b/d week-on-week, while crude stocks built by almost 6 million barrels.”


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OPEC:Members of the Organization of the Petroleum Exporting Countries meet this weekend to discuss market fundamentals and possibly consider a cut to production levels to boost falling prices. “In view of the latest price slump and the oversupply that looks set to materialize next year, OPEC is thinking about cutting back oil production,” Commerzbank said in a note. Russia, along with OPEC nations led by Saudi Arabia, has been pumping more oil since the summer to offset the loss of Iranian barrels, which now looks likely to be smaller than was anticipated due to waivers granted to some buyers. Oil prices have fallen by around 14% over the past month.

AHEAD: Baker Hughes is set to release its weekly rig-count report Friday that details U.S. drilling activity.
OPEC Joint Ministerial Monitoring Committee meets on Sunday in Abu Dhabi.

Stock Market News – Saudi Arabia readies to boost supplies over Iran oil sanctions.


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Saudi Arabia readies to boost supplies over Iran oil sanctions. Analysts expect Iranian exports of some 2.5 million barrels per day to plunge by 1-2 million bpd when US sanctions take effect November 5. With Washington poised to curtail Iran’s oil exports, OPEC heavyweight Saudi Arabia and its partners stand ready to ramp up supplies even as market conditions remain uncertain, analysts say.

The renewal of sanctions on the Islamic republic comes at a time of major supply disruptions in several producer nations and as US President Donald Trump aims to prevent an oil price hike. Analysts expect that Iran’s oil exports, which reach around 2.5 million barrels per day in normal times, to plunge by one million to two million bpd when sanctions take effect on November 5.

That is expected to strain an already tight market. Outages in Libya, Venezuela, Nigeria, Mexico, Angola and others forced OPEC and non-OPEC producers in June to abandon an agreed cut in output and boost supplies. “We are entering a very crucial period for the oil market,” the International Energy Agency said in a September report. “Things are tightening up.”

Saudi Arabia is the only producer with significant spare capacity of around two million bpd that can be tapped into to compensate for the loss of Iranian supplies. Even as relations soured between the West and Riyadh over the murder of the Washington Post contributor, Saudi Arabia said it had no plans to wage a retaliatory oil embargo.

Saudi Energy Minister Khalid al-Falih said his country, which raised output by 700,000 bpd to 10.7 million bpd in October, was prepared to further bump up production to 12 million bpd. “We have sanctions on Iran and nobody has a clue what Iranian exports will be,” he told the Russian news agency Tass last week.


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In addition, there are potential declines in Libya, Nigeria, Mexico and Venezuela, he said, also pointing to uncertainty over US shale oil production. Falih said the kingdom could turn to its huge strategic reserves of around 300 billion barrels to meet global demand. Anas al-Hajji, a Houston-based oil expert, said the fall in Iranian exports was tough to assess but he expected “less than what most analysts are talking about.”

“The Iranians have perfected their game working under sanctions. There will be a black market for Iranian crude, Hajji told AFP. Saudi Arabia’s neighbors the United Arab Emirates and Kuwait can also raise their output by up to 300,000 bpd if needed. ‘It’s unsustainableKuwaiti oil expert Kamel al-Harami said he doubts Riyadh can sustain production of 12 million bpd for a prolonged period.

OPEC is constrained by low spare capacity in a tight market under threat from unplanned outages, low investment and unpredictable geopolitical unrest. Iranian officials are betting on the unstable market conditions to beat US sanctions.

Mr. Trump both tries to decrease Iran’s oil exports significantly and also wants prices not to go up. These two can’t happen together,” Iranian Oil Minister Bijan Namdar Zanganeh said late September. Tehran sold oil to private buyers through its energy exchange for the first time on October 28, as part of efforts to counter the imminent return of sanctions.

Some estimates show Iran’s crude exports have already dropped by a third since May with even companies from traditional clients China and India abandoning purchases. Oil prices which rebounded from under $30 a barrel in early 2016 to a four-year high of over $86 a barrel in early October have fallen to around $75 due to fears of weaker global demand.


More News On Crude Oil Markets – Thousands of Iranians chanting “Death to America” rallied on Sunday to mark the anniversary of the seizure of the U.S. Embassy during the 1979 Islamic Revolution. Students attending the government-organized rally in the capital Tehran, broadcast live by state television, burned the Stars and Stripes, an effigy of Uncle Sam and pictures of President Donald Trump outside the former embassy compound.


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Hardline students stormed the embassy on Nov. 4, 1979, soon after the fall of the U.S.-backed shah, and 52 Americans were held hostage there for 444 days. The two countries have been enemies ever since. State media said millions turned out for rallies in towns and cities, swearing allegiance to the clerical establishment and Supreme Leader Ayatollah Ali Khamenei. The figure could not be independently confirmed by Reuters.

Rallies are staged on the embassy takeover anniversary every year. But rancour is especially strong this time following Trump’s decision in May to withdraw from world powers’ 2015 nuclear deal with Iran and reimpose sanctions on Tehran. The deal brought about the lifting of most international financial and economic sanctions in return for Tehran curbing its disputed nuclear activity under U.N. surveillance.

Trump said the deal was weak and favored Iran. The other signatories – Britain, France, Germany, Russia and China – remain committed to the accord. U.S. Secretary of State Mike Pompeo said the penalties set to return on Monday “are the toughest sanctions ever put in place on the Islamic Republic of Iran.”

Interviewed on “Fox News Sunday,” Pompeo said, “There’s a handful of places where countries already have made significant reductions in their crude oil exports and need a little more time to get to zero. And we’re going to provide that to them.” He did not elaborate. Pompeo noted that oil sanctions would be coupled with financial sanctions involving “over 600 designations of individuals and companies in Iran.”

The Iranian military said it would launch two days of air defense drills on Monday and assured Iranians that it could neutralize any threats, the state news agency IRNA reported. “We can assure our people that the enemy will not be able to carry out its threats against our country,” IRNA quoted Habibollah Sayyari, the coordinating officer, as saying.


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Among the anniversary events was an exhibition of cartoons in Tehran called “Donald Salman” – a reference to the close ties between the U.S. president and King Salman, ruler of Iran’s regional rival, Saudi Arabia. “It’s black humor, but the audience can also be brought to reflect on the contradictions in the behavior of Trump and (the royal house of) Al Saud,” artist Masoud Shojaei Tabatabai told state television in Tehran.

The restoration of U.S. sanctions on Monday targeting Iran’s oil sales and banking sector is part of an effort by Trump to force Iran to halt its nuclear and ballistic missile programs outright, as well as its support for proxy forces in conflicts across the Middle East.