|Day's Range||36.38 - 37.08|
Oil prices dropped on Thursday, reversing gains in the previous session, on concern over whether major crude producers will be able to agree to extend record output cuts, heightened by worries over a huge build in U.S. distillate inventories. Brent crude futures fell 1.18%, or 47 cents, to $39.32 a barrel as of 0652 GMT, while U.S. West Texas Intermediate (WTI) crude futures slid 1.80%, or 67 cents, to $36.62 a barrel. Saudi Arabia and Russia, two of the world's biggest oil producers, have agreed to support extending into July the 9.7 million barrels per day (bpd) in supply cuts backed in April by the OPEC+ group, comprised of the Organization of the Petroleum Exporting Countries and other major producers.
(Bloomberg) -- Oil retreated from a three-month high as OPEC+ unity was threatened by a long-running feud over complying with production cutbacks, while U.S. data cast doubt on the strength of the demand recovery.Futures in New York fell around 2% to below $37 a barrel after closing at the highest since March 6. Saudi Arabia and Russia have reached a preliminary deal to extend output curbs for an extra month, but it’s conditional on other members making deeper cuts in the months ahead to make up for past non-compliance, people familiar with the matter said. The two leading producers have lost their patience with the errant behavior of the next-biggest, Iraq.Meanwhile in the U.S., diesel demand fell to a 21-year low last week and gasoline stockpiles swelled, according to Energy Information Administration data. The figures suggest that fuel consumption in the world’s largest oil consumer isn’t recovering as quickly as previously anticipated.While oil prices have rebounded rapidly since mid-April, the rally is faltering amid several headwinds. The White House is suspending passenger flights from Chinese airlines as relations between the world’s two biggest economies continue to worsen, while civil unrest across the U.S. is complicating the economic recovery from the virus and risking a second wave of infections.West Texas Intermediate for July delivery dropped 1.7% to $36.65 a barrel on the New York Mercantile Exchange as of 7:36 a.m. in London after rising 1.3% on Wednesday. Brent for August settlement declined 1% to $39.39 on the ICE Futures Europe exchange after trading above $40 for the first time in almost three months in the previous session.“The OPEC+ decision will be key for price direction over the next week, with a potential extension providing some limited upside,” said Warren Patterson, head of commodities strategy at ING Bank NV. However, there’s a disconnect between the rise in oil prices and weak refining margins, suggesting the rally has gotten a bit ahead of itself at least in the near term, he said.Riyadh and Moscow are aligned on continuing cuts at the current level for an extra month beyond July 1. But if they don’t receive assurances from Iraq and the other laggards at their next meeting -- scheduled for June 9-10 -- the group’s daily supply curbs will ease to 7.7 million barrels for the rest of 2020.The OPEC+ disagreements are coming to a head as higher prices have already spurred some U.S. producers to bring wells back online. EOG Resources Inc., America’s largest shale-focused producer, and Permian driller Parsley Energy Inc. are preparing to ramp up output just weeks after turning off the taps.Diesel supplied in the U.S. tumbled 17% to 2.72 million barrels a day last week, according to the EIA, while gasoline inventories rose by a higher-than forecast 2.8 million barrels. Overall crude stockpiles fell by 2.1 million barrels and inventories at the storage hub at Cushing declined for a fourth week.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The short-term direction of July WTI crude oil on Thursday is likely to be determined by trader reaction to the main 50% level at $36.07.
Falling fossil fuel demand coupled with mounting risk for investors could slash the value of oil, gas and coal reserves by two thirds, sending shock waves through the global economy, energy analysts warned Thursday. The value of projected profits for the sector could also fall by two thirds, according to a report from Carbon Tracker, a non-profit financial think tank focused on aligning capital markets with climate policy. Competition from clean technologies along with government policies to achieve climate targets and energy security are pushing the fossil fuel industry toward "terminal decline", the study concluded.
(Bloomberg) -- The grand alliance that’s helped revive global oil markets is being rattled by a long-running feud over members breaking their promises.Just a day before a proposed gathering on Thursday, the OPEC+ coalition hurriedly backtracked from the meeting intended to green-light an extension of its deepest production cutbacks and prop up crude prices.Saudi Arabia and Russia -- the leading producers in the group -- have lost patience with the errant behavior of the next-biggest member, Iraq, according to people familiar with the matter. While most of the main players are delivering their agreed share of output curbs, Baghdad is once again reneging on its commitments.At stake is the unity of the 23-nation partnership, which has helped engineer a doubling in international oil prices following the battering meted out by the coronavirus crisis. If the Iraqis, and other delinquents such as Nigeria and Kazakhstan, don’t shape up then Riyadh and Moscow are warning they will start to phase out the supply curbs that are putting a floor under the market.The kingdom and the Kremlin are pushing the stragglers hard -- not just demanding they implement the cuts already promised, but asking for deeper curbs in the coming months to compensate for their earlier failings.“Riyadh and Moscow are not kidding about implementing some form of compliance-improvement mechanism,” said Bob McNally, founder of consultant Rapidan Energy Group and a former White House official. “Without it, they walk.Impossible ChoiceSuch penance would be difficult for Iraq to accept. It made less than half of its assigned cutbacks last month, so compensating fully would require it to slash production by a further 24% to about 3.28 million barrels a day, according to Bloomberg calculations.For a country still rebuilding its economy following decades of war, sanctions and Islamist insurgency, that’s a tall order. Resisting the temptation of selling crude during the current market rebound, which has brought prices back to about $40 a barrel, may prove impossible.While Iraqi Finance Minister and Acting Oil Minister Ali Allawi did pledge to improve compliance with pledged cuts in an unusual Twitter post on Tuesday, he didn’t go any further.The Organization of Petroleum Exporting Countries and its allies pledged in April to slash oil output by 9.7 million barrels a day, or roughly 10% of global oil supplies, to offset the unprecedented collapse in demand caused by coronavirus lockdowns.A few weeks later, Saudi Arabia and its closest allies in the Persian Gulf pledged additional supply restraint of 1.2 million barrels a day in June.Riyadh and Moscow are aligned on continuing cuts at the current level for an extra month beyond July 1, according to people familiar with the matter. But if they don’t receive assurances from Iraq and the other laggards at their next meeting -- currently scheduled for June 9-10 -- the group’s daily supply curbs will ease to 7.7 million barrels for the rest of the year.Prince’s PriorityEnforcing better compliance among OPEC+ nations has been a motif since Saudi Energy Minister Prince Abdulaziz bin Salman was appointed.In his first public outing after becoming energy minister, in Abu Dhabi last September, bin Salman was literally applauded for securing loud pledges of atonement from Iraq and Nigeria.But his tenure has also been stormy, and the latest move has high stakes. In March, the prince’s attempt to force Russia to make deeper output reductions backfired spectacularly, splintering the entire alliance and igniting a destructive price war.Two months ago, bin Salman’s achievement in successful restoring the OPEC+ coalition and forging an agreement for historic production cuts was delayed and ultimately overshadowed by a spat over Mexico’s contribution to the deal.Consistent LaggardIraq’s recalcitrance is as old as the OPEC+ partnership itself, which was founded in 2016 to shore up oil prices against the onslaught of American shale.Baghdad argued that the exemption from cutbacks it had received since the conflicts of the 1990s should continue. The central government also has limited influence over about 500,000 barrels a day of production from the semi-autonomous Kurdish region.At the critical meeting where OPEC+ was formed, Oil Minister Jabbar al-Luaibi had to leave the conference room and call his prime minister for approval to accept the new strictures.Nonetheless, recent history suggests the burden might not be as onerous as it appears, and that Iraq’s resistance could be overcome.Last December, Baghdad was pressed to accept additional supply reductions, even though it had barely managed to cut output earlier in the year. Iraq knew it wasn’t expected to implement the entire package, but rather consider the new target as a spur to improve its performance, analysts said at the time.“It feels like Groundhog Day again as compliance issues complicate the effort to conclude a short roll-over agreement,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC. “Nonetheless, we still think these issues will be resolved and that a short extension will be announced.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
OPEC delegates said the production agreement is a sign that many of the world’s largest oil producers are confident that oil demand will return quickly as coronavirus lockdown restrictions ease around the world.
(Bloomberg) -- Oil traders and analysts scrutinizing U.S. inventory data for signs of a market recovery are being confronted by an odd situation: the math just doesn’t add up.Various government data sets including stockpiles, production, imports and exports are signaling that current official figures on at least some supplies are excessive. While it’s unclear where exactly the discrepancy lies, the difference could potentially signal a more bullish outlook for crude prices as they claw their way back after diving below zero in April.The excess is showing up in the U.S. Energy Information Administration’s so-called crude supply adjustment factor -- the difference between stockpile numbers and those implied by production, refinery demand, imports and exports. That has averaged negative 980,000 barrels daily over the past four weeks -- the largest in records going back to 2001, and equivalent to more than 27 million barrels.The adjustment factor tends to swing back and forth, depending on irregularities in various surveys the EIA pulls from for its reports. For these weekly reports, the EIA is not able to collect domestic crude oil production, instead estimating it from its short-term energy outlook model.Some investors lay the blame for the current discrepancy on U.S. oil production numbers. While daily output fell 700,000 barrels to 11.2 million in May, they believe oil’s plunge into negative territory in April should have led to a steeper decline.Just last month, consultancy IHS Markit said that U.S. oil producers are in the process of curtailing 1.75 million barrels a day of existing output by early June due to operating cash losses, lack of demand and storage capacity and an unwillingness to sell resources at low prices. Some of that lower production is already becoming evident, according to information disclosed in various company announcements and state data.Read: No One Expected U.S. Shale Oil Output Cuts to Happen So FastWhile output may be a factor, it’s unlikely the full answer. According to the EIA’s Robert Merriam, the accuracy of its production modeling compared to subsequent monthly data has been good, often within 1-2% in most months.Since prices started tumbling in March following the collapse of the OPEC+ deal to cut output, the EIA’s weekly data has recorded a production decline of 1.9 million barrels, which he said was substantial compared with historical numbers. And while he’s also seen a wide range of analyst estimates on current production volumes, it’s not clear whether those are comprehensive or extrapolated.“The adjustment reflects the aggregate uncertainty around each of the supply and disposition elements, and the crude production estimate certainly remains but one potential factor,” Merriam, the director of the Office of Energy Production, Conversion, and Delivery at the EIA, said.He said that there have also some large weekly swings in reported inventory levels and refinery runs, so all the elements within the crude data are moving around far more than they usually do, adding that “the timing of reporting those could also be driving the adjustment lately, as they always do.”A year ago, the crude adjustment factor caught the attention of energy enthusiasts when the figure was more than 800,000 barrels a day for four weeks, implying the reverse -- that something in the data was undercounted. The EIA, at the time, had suspected that besides understating oil production, one of the reasons was plant condensate that was associated with natural gas output, but blended into the crude oil stream.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil closed at the highest level since early March, buoyed by optimism that OPEC+ will rebalance the market. But the rally could turn on what happens at the alliance’s June meeting.The producer group reached a preliminary agreement Wednesday to extend historic output curbs for an extra month, with Saudi Arabia and Russia drawing a hard line on cheating, and insisting that countries make up for past non-compliance by deepening future cuts. Their stance injects some uncertainty into the market, which has rallied from historic lows but remains vulnerable to ongoing demand weakness and a persistent supply glut.In the U.S., the outlook for fuel consumption dimmed after U.S. government data showed that diesel demand fell to a 21-year low last week while inventories rose to the highest level since 2010. Gasoline supplies also swelled, suggesting consumption isn’t rebounding as quickly as initially thought. The builds in fuel stockpiles offset a larger-than-expected decline in crude inventories.Also read: Oil Traders Are Asking Why U.S. Inventory Math Doesn’t Add UpFutures in New York fluctuated between gains and losses amid the conflicting market signals. While West Texas Intermediate crude ended the session 1% higher, prices declined after the close.“We’re in wait-and-see mode,” said Michael Lynch, president of Strategic Energy & Economic Research Inc. The question now is not whether OPEC+ will extend cuts but by how much, he said. “If they extend until the end of the year, that will encourage optimism on the part of buyers.”Russia and Saudi Arabia, the de-facto leaders of OPEC+, are putting pressure on Iraq, Nigeria, Kazakhstan and Angola to make firm commitments they will improve compliance, and also to make up for past wrongs. The OPEC+ leaders are demanding the four countries compensate for non-compliance in May -- and potentially in June -- by cutting extra in July, August and September, according to the people familiar with the situation. That’s a painful prospect for those producers, already struggling with the budget impact of low prices.The ultimatum comes as higher prices have already spurred some U.S. producers to bring wells back online. EOG Resources Inc., America’s largest shale-focused producer, and Permian producer Parsley Energy Inc. both said they’re preparing to ramp up output just weeks after turning off the taps.The OPEC+ leaders expect to hold a meeting on June 10, according to people familiar with the matter. But negotiations continue with the aim of simply ratifying the accord at the virtual gathering, according to the people.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Private payrolls fall less than expected
Oil prices fell Wednesday as Saudi Arabia and Russia reportedly reached a deal on output cuts while weekly U.S. supply data delivered another surprise.
A Minnesota pollution regulator said on Wednesday it will hold a public hearing this summer on Enbridge Inc's plan to replace its Line 3 oil pipeline, adding a potential three-month delay and pushing the bulk of construction to next year. The Minnesota Pollution Control Agency (MPCA) said the hearing will focus on how Enbridge <ENB.TO> intends to protect streams and wetlands that the pipeline crosses. Replacing Line 3, a 1960s-era branch of Enbridge's Mainline network, would allow the company to boost flow from a Canadian oil hub in Edmonton, Alberta, to Midwest refiners.
Oil futures Wednesday close higher, extending a move around the highest level since early March, as uncertainty over whether a meeting of crude producers will be held this week or next raised doubts about a willingness to substantially extend global production cuts that taper after June.
Russian President Vladimir Putin on Wednesday ordered a state of emergency and criticised a subsidiary of metals giant Norilsk Nickel after a massive diesel spill into a Siberian river. The spill of over 20,000 tonnes of diesel fuel took place on Friday. A fuel reservoir collapsed at a power plant near the city of Norilsk, located above the Arctic Circle, and leaked into a nearby river.
U.S. oil futures finished Wednesday with a gain, following news reports that said the Organization of the Petroleum Exporting Countries and its allies may extend their current production cuts by one month, despite some expectations for a longer extension. The market also remained unsure over whether the producers, known as OPEC+, would hold a video conference this week or next to discuss production levels. Also on Wednesday, U.S. government data revealed a weekly decline in U.S. crude supplies, along with increases in gasoline and distillate stockpiles. July West Texas Intermediate oil rose 48 cents, or 1.3%, to settle at $37.29 a barrel on the New York Mercantile Exchange. That was the highest finish for a front-month contract since March 6, according to Dow Jones Market Data.
Crude oil markets continue to show a lot of volatility as Saudi Arabia is now talking about killing the idea of extended production cuts.
Oil swings between gains and losses as recovery hopes are offset by worries about extension of current production cuts.
When OPEC, Russia and their allies agreed in April to slash oil production, little did they expect that their initiative to prop up collapsing prices would be helped by a swift drop in U.S. output. Now that crude has rallied on the back of those cuts from below $20 a barrel to $40 or more, the group known as OPEC+ faces a fresh challenge: stopping U.S. shale production delivering another surprise by recovering equally quickly. "The plan is to stick to prices of $40-$50 per barrel because as soon as they rise any further to say $70 per barrel it encourages too much oil production, including U.S. shale," said a Russian source familiar with OPEC+ talks on the issue.
The US dollar has gone back and forth against the yen during the trading session on Wednesday, as we continue to see a lot of noise just above at the ¥109 level.
After months of fears and price slump, crude oil futures are rising and gaining ground. Worries that Covid-19 would severely impact demand was a large part of the fall--and it did. The market was so concerned that it even shrugged off deep cuts by OPEC+. Now that prices are rising again, what has changed?One factor, of course, is that the world is starting to reopen. Parts of Europe and the United States are testing the waters, and places that are allowed to open have been flooded with eager customers tired of being in quarantine. This will lead to more demand for oil and gas, and thus prices will rise. Another factor could be that the world has been shut down for a few months now, long enough to start gauging how much oil demand has actually been affected. The API oil report showed crude inventories fell by 483K barrels last week--although gasoline inventories rose. A last factor, of course, is OPEC+ again: the group was scheduled to meet June 4, although that meeting may be delayed. The market will be watching closely to see if supply cuts are extended. Join us on TD Ameritrade Network to see the outcome of the meeting and other crude oil news!Photo by Zbynek Burival on UnsplashSee more from Benzinga * Tuesday's Market Minute: Stocks VS Reality * Monday's Market Minute: What To Stay Dialed In On * Friday's Market Minute: The U.S. Consumer Isn't Spending(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
The Energy Information Administration reported Wednesday that U.S. crude inventories edged down by 2.1 million barrels for the week ended May 29. That compared with a forecast by analysts polled by S&P Global Platts for an average climb of 3.5 million barrels. The American Petroleum Institute on Tuesday reported a fall of 483,000 barrels, according to sources. The EIA data also showed crude stocks at the Cushing, Okla., storage hub declined by about 1.8 million barrels for the week. Gasoline supply rose by 2.8 million barrels, while distillate stockpiles added 9.9 million barrels. The S&P Global Platts survey had shown expectations for a supply decline of 300,000 barrels for gasoline, while distillate stocks were forecast at 2.8 million barrels higher. July West Texas Intermediate crude fell 58 cents, or 1.6%, at $36.23 a barrel on the New York Mercantile Exchange. It was trading at $36.77 before the supply data.
Occidental Petroleum Corp is removing non-essential workers from some central Gulf of Mexico facilities ahead of Tropical Storm Cristobal, the company said on Wednesday. The company's Gulf of Mexico operations are continuing uninterrupted, the company said. Other Gulf of Mexico operators, including Chevron Corp , Exxon Mobil Corp, BHP Petroleum and Hess Corp , said on Wednesday they are monitoring the storm but have not evacuated workers so far.