Commodities

Oil slips after rally last week on Middle East, tight supply

Published

7 months ago

February 12, 2024

Oil slips after rally last week on Middle East, tight supply

By Natalie Grover

LONDON (Reuters) -Oil prices slipped on Monday as investors indulged in some profit-taking after both benchmarks ended last week about 6% higher on Middle East tensions and as refining outages squeezed refined products markets.

futures were down 89 cents, or about 1.1%, at $81.30 a barrel, while U.S. West Texas Intermediate crude futures slipped 83 cents, also about 1.1%, to $76.01 a barrel at 1239 GMT.

Last week, the major forces underlying the rally were the persistent threats to shipping in the Red Sea, Ukrainian strikes on Russian refineries and U.S. refinery maintenance, Tamas Varga of oil broker PVM told Reuters.

This has led to scarce availability of products, particularly in the middle of the barrel, he said.

“These factors have not subsided yet – and for this reason, I believe that what we see at the moment is only a retracement.”

Logistics disruptions in the Red Sea continued on Monday, with Yemen-based Houthis saying they had targeted a cargo ship in the Red Sea, which they claimed was American.

Shipping trackers said the Marshall Islands-flagged ship was Greek-owned, while analysts said it had been heading to Iran with a corn cargo.

The Houthis have targeted shipping with drones and missiles since November in solidarity with Palestinians in Gaza. The United States has led retaliatory strikes on Houthi missile sites since January.

The Houthis have since said they will target ships not just connected to Israel, but also the U.S. and Britain.

In other supply news, Saudi Arabia’s energy minister on Monday said the reason behind the Kingdom’s recent decision to halt its oil capacity expansion plans was the energy transition, adding that the kingdom has plenty of spare capacity to cushion the oil market.

In terms of non-OPEC production, however, a potential uptick in U.S. production emerged, with U.S. energy firms increasing oil and rigs to their highest since mid-December.

Still, demand concerns fester.

A U.S. Federal Reserve official said she had no interest in recommending an interest rate cut, adding to the chorus on further reining in inflation.

On the other side of the Atlantic, European Central Bank officials soothed markets by suggesting cuts were on the table sooner rather than later.

Higher interest rates slow economic growth, dampening oil demand.

U.S. inflation data is expected on Tuesday, while British inflation data and euro zone GDP should land on Wednesday.

Meanwhile, France’s TotalEnergies (EPA:) CEO Patrick Pouyanne said he does not see peak oil demand in the numbers, adding “we should exit debate about peak oil demand, be serious, and invest”.

Paris-based oil forecaster the International Energy Agency (IEA), which represents industrialised countries, predicts oil demand will peak by 2030, undercutting the rationale for investment.

But OPEC believes oil use will keep rising over the next two decades.

Commodities

Oil prices settle lower after weak August jobs report adds to demand concerns

Published

11 hours ago

September 7, 2024

Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.

At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.

U.S. economic slowdown worries resurface after weak jobs report

The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.

Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.

Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.

Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.

U.S., Europe working on Iran sanctions

Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.

The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.

Commodities

Goldman Sachs expects OPEC+ production increases to start in December

Published

11 hours ago

September 7, 2024

(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.

OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.

However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.

The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.

© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.

Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]

Commodities

Citi, Bank of America see oil prices potentially going to $60

Published

1 day ago

September 6, 2024

Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.

While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.

“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.

They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.

“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.

OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.

Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.

The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.

“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.