Investing.com – Two factors will determine the direction of oil markets in the coming week. The first is how much the conflict in the Middle East could escalate and what it might mean for supplies in the world’s top oil producing region. The second is what will the weekly update on US crude stockpiles look like on Wednesday.
Crude prices got to finish the just-ended week up as much as 7%, after somewhat of a roller-coaster. An initial 4% gain on Monday from concerns over the latest Middle East war was pared to just 1% by Thursday from data showing the worst weekly US crude build in eight months, on top of record production.
By Friday, though, it looked like oil had entered a whole new world as the United States exercised its first sanctions against the flouters of the G-7 price cap on Russian oil. As the week drew to a close and crude prices tacked on almost 6% more, the Biden administration had not announced if it will come down hard on Iranian oil next.
There were rumblings though from all fronts, pushing it to act.
One of the chief instigators was Iran itself, which continued to demonstrate the bellicose nature of its relationship with Hamas. State-organized rallies were held across the Islamic Republic Friday in support of the Palestinian terror group, simultaneous with condemnations of the Israeli bombardment of the blockaded Gaza Strip.
In the US Congress, Republicans were just as boisterous. Kevin McCarthy of California said the United States should “stop Iran from being able to produce the oil”. Lindsey Graham of South California said if the conflict escalates, “we should tell the Ayatollah we will destroy your oil refineries and your oil infrastructure.”
Treasury Secretary Janet Yellen did say nothing was ‘off the table’ as the United States considers new sanctions on Iran and Hamas.
The truth is that’s easier said than done.
The crisis in Israel actually poses a new challenge for the world economy and the Biden administration, which has spent the last year working to combat inflation in the United States and to corral energy prices that have become volatile because of Russia’s war in Ukraine. Another war in the Middle East complicates those efforts by threatening to constrain oil supplies and send prices higher.
While “Iran is broadly complicit in these attacks for having supported Hamas going back decades,” there’s currently “no evidence of direct support” for this specific attack, said US Deputy National Security Adviser Jon Finer.
The White House moved instead to close loopholes in its sanctions enforcement on Russia with sanctions on owners of tankers carrying Russian oil priced above the G7’s cap of $60 a barrel.
With Tehran, though, no one could tell what the Biden administration would do.
Since late 2022, Washington has virtually turned a blind eye to surging Iranian oil exports that bypassed US sanctions as it allowed an informal détente with Tehran to get more of the Islamic Republic’s oil onto the world market to offset OPEC+ production cuts. As a result, Iranian crude output is estimated to have surged nearly 700,000 barrels a day this year – the second-largest source of incremental supply in 2023, behind only US shale oil.
Even if the White House advocates a tougher approach on Iranian sanctions, ultimately the amount of oil snagged from the mullahs at midsea might be nominal.
In fact, the administration will likely be more effective in denying Iran some of the cold cash it needs from oil.
Democratic Senator Cory Booker said $6 billion in Iranian oil assets freed up as part of last month’s U.S.-Iran prisoner swap has been re-frozen. The money was meant to be used for food, medicine and other humanitarian goods.
So, money, more than oil, might be at stake on any redoubling of US sanctions’ efforts on Iran.
On the oil inventory front, US crude stocks could see another build in the coming week amid the refinery maintenance season – unless exports, which tumbled the previous week, come back with a huge spike.
In its latest data roundup for the week ended Oct. 6, the US Energy Information Administration, or EIA, said the climbed by 10.176 million barrels, the most since a weekly rise of 16.283M in mid-February.
Crude stocks ballooned last week as exports, often a juggernaut in the weekly EIA report, fell almost 2 million barrels to reach 3.067M per day versus the 4.956M per day level during the week to Sept. 29.
Crude exports hit a record high just shy of 4 million barrels per day in the first half of the year, the EIA said in a separate report on Wednesday.
Processing of crude oil into fuel and other products also dropped last week, by almost 2%, to 85.7% as refineries went into maintenance.
More riveting than that was the EIA’s estimate on crude production. The agency gave that as 13.2M barrels per day – up 300,000 from the prior week. It was the highest ever government estimate on crude production, which prior to this had not exceeded the 13.1M peak reached just before the March 2020 outbreak of the coronavirus pandemic that decimated crude demand.
The EIA has been estimating higher crude production for the United States in recent months, citing higher efficiency in output from US shale oil basins despite a sheer cutback in the number of oil rigs actively deployed by drillers.
“It’s staggering how far US oil production has come in just a few months this year to reach this record high cited by the EIA,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Oil: Market Settlements and Activity
New York-traded , crude for delivery in November did a final trade of $86.35 on Friday after officially settling the session at $87.69, up $4.78, or 5.8%. The US crude benchmark hit a session high of $87.83 versus the week’s low of $82.78.
London-traded crude for the most-active December contract did a final trade of $90.80 on Friday, after officially settling the session at $90.89. The global crude benchmark hit a session high of $91 versus the week’s low of $85.18.
Oil: WTI Technical Price Outlook
The runaway gap for US crude left at $82.80 has been filled with the retracement to $82.30 and fresh to reach $87.80, noted Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“Going further, immediate resistance in WTI is seen at the Daily Middle Bollinger Band of $88.10 followed by $88.30,” he said.
“Clearing through $88.30 will put $90.80 into focus as the next immediate challenge. If this zone is accepted by market, expect a smooth rally that aims to retest $96.50.”
On the lower end, stability above the 100-week SMA, or Simple Moving Average, of $86.20 may be considered as active support, Dixit said.
“A sustained break below $86.60-$86.20 will be the first indication of sellers gaining confidence looking for a drop to $83 again.”
Gold: Market Settlements and Activity
From near the jaws of $1,700 an ounce, gold bulls are back to $1,900 safety, after the Middle East’s latest crisis led to a huge leap Friday that topped a week of incredible price swings in the yellow metal.
Gold’s most-active contract on New York’s Comex, December, did a final trade of $1,945.90 per ounce on Friday after officially settling the session at $1,941.50, up $58.50, or 3.1%, on the day. For the week, the benchmark gold futures showed a gain of 5%, its most in a week since March.
The , more closely watched by some traders than futures, settled at $1,932.82, up $63.95 or 3.4%. Last Friday, the spot price, which reflects real-time trades in bullion, hit an intraday low of $1,810.10 — less than $10 above $1,700 territory.
Friday’s move up was the biggest in a day for spot gold since March 17. The rounded-up weekly gain of 5% in the current week was also the largest since March.
Gold’s latest jump came after the Israeli government late on Thursday warned more than 1 million people in Northern Gaza to evacuate the area as its war with Hamas escalated. Talk was also growing that Israel was preparing for a major land assault on Gaza.
“Growing chaos in the Middle Easter continues to fuel safe-haven demand for gold as a 2% rally into the weekend also puts pressure on bears in the marketplace,” Neils Christensen wrote on kitco.com, the website of the bullion trading band of the same name.
More startling, the gold rally came as the , or DXY, ticked up for a second day in a row, resuming the greenback’s run-up over the last three months, which was interrupted only by last week’s slide. Gold typically moves in the opposite direction to the dollar.
Gold: Spot Price Technical Outlook
The next immediate resistance for spot gold is seen at the descending trendline point of interest at $1,938 and $1,942, said Dixit of SKCharting.com.
“A continuation above $1,942 will open the door to the previous month high of $1,953, which is the acceleration point for the next bull run into a new record high, after retesting $2,080.”
He also noted that the 4-hour chart on spot gold showed overbought conditions calling for a softening of its momentum, with chances of a pullback towards the breakout zone seen at the 200-day SMA of $1,929 and the 100-day SMA of $1,923.
“If selling pushes the metal below $1,923, expect a further decline to the 50 Day EMA, or Exponential Moving Average, of $1,897, followed by the Daily Middle Bollinger Band of $1,878.”
Natural gas: Market Settlements and Activity
The most-active contract on the New York Mercantile Exchange’s Henry Hub did a final trade of $3.208 per mmBtu, or million metric British thermal units on Friday, after officially settling the session at $3.2360, down 10.8 cents, or 3.2%, on the day. For the week, November gas also fell 2%, versus the prior week’s advance of 14%.
Gas price fell despite the Energy Information Administration, or EIA, reporting a build of just 84 billion cubic feet, or bcf, in storage of the fuel during the week ended Oct. 6, versus the 88 bcf build expected by industry analysts tracked by Investing.com. In the prior week to Sept. 29, storage rose by 86 bcf.
Total gas in US storage was at 3.529 trillion cubic feet as of last week, up 9.8% from a year ago, the EIA said. Earlier this year, the storage was more than 20% up year-on-year. On a five-year basis (2018-2022), inventories were just 4.8% higher, down from double-digits earlier this year.
Natural gas: Price Outlook
Stability below the $3.47-$3.37 level will keep prices in a consolidation mode, looking to retest the support zone of $3.14, followed by the Daily Middle Bollinger Band of $2.97, said SKCharting’s Dixit.
“If this zone fails to hold as support, look for a further drop to the 50-day EMA of $2.84 and the 100-day SMA of $2.66.”
Resumption of the bullish trend will require gas to reclaim momentum above the 50-week EMA of $3.35 and receive firm acceptance as well above the swing high of $3.47, said Dixit.
“The next major resistance sits at the 200-week SMA of $3.77, followed by the 50-month EMA of $3.84.”
Disclaimer: Barani Krishnan does not hold positions in the commodities and securities he writes about.
Gold prices steady above $2,000 with nonfarm payrolls in focus
Investing.com – Gold prices moved little in Asian trade on Friday, sticking above key levels as markets awaited a potentially softer U.S. nonfarm payrolls reading, which comes just days before a Federal Reserve meeting.
The yellow metal had raced to record highs at the beginning of the week, helped by a mix of rate cut bets and safe haven demand.
But it had lost the record highs as abruptly as it had reached them, as traders locked in profits amid some uncertainty over U.S. monetary policy.
steadied at $2,030.26 an ounce, while expiring in February were flat at $2,046.05 an ounce by 01:17 ET (06:17 GMT). Both instruments had touched record highs above $2,100 an ounce on Monday, before swiftly reversing most gains.
Still, the yellow metal had now maintained the $2,000 an ounce level for nearly three weeks, indicating increased optimism over gold’s prospects in the coming months.
Nonfarm payrolls in sight, markets seek softer reading
Focus was now squarely on data for November, due later on Friday.
The reading is expected to show further cooling in the labor market, after a drop in and data signaled some unwinding in the sector.
Any further cooling in the labor market gives the Federal Reserve less impetus to keep interest rates higher for longer-a scenario that benefits gold.
While the central bank is when it meets next week, its outlook on monetary policy, particularly on when it plans to begin trimming rates, remains uncertain.
Bets that the were a key point of support for gold prices earlier this week. But traders scaled back those bets, given that the Fed has largely maintained its stance that rates will remain higher for longer.
Still, the yellow metal may be poised for more strength in the coming months, especially if interest rates fall and global economic conditions deteriorate further.
A raft of recent economic readings from the U.S., Asia and the euro zone suggested that growth was set to cool in 2024.
Factbox-Australia’s Woodside, Santos in talks for $53 billion oil-gas merger
© Reuters. FILE PHOTO: FILE PHOTO: View of a model of carbon capture and storage designed by Santos Ltd, at the Australian Petroleum Production and Exploration Association conference in Brisbane, Australia May 18, 2022. REUTERS/Sonali Paul/File Photo/File Photo
(Reuters) – Australia energy companies Woodside (OTC:) and Santos Ltd said late on Thursday that they are in preliminary merger talks, in what could be the latest big deal in a wave of global consolidation the in oil and gas sector.
A potential combination of the companies, which together have a market value of about $52 billion, comes amid challenges faced by both in their domestic projects from Indigenous people as well as rising pressures of decarbonisation.
Both companies have seen their share performance lag global peers.
Woodside in October cut its its 2023 production outlook and missed third-quarter revenue estimates, while it was ordered by the Australian federal court to seek new approval to conduct seismic blasting under the seabed for its $12 billion Scarborough gas project after a legal challenge by an Indigenous woman.
Santos is contending with legal challenges from a traditional land owner from the Tiwi Islands on undersea pipeline works for its $3.6 billion Barossa gas project and has forecast lower output in 2024 as its Bayu-Undan gas field reached the end of its life and its West Australian offshore field’s output declined.
Below are key details on both companies, including production and reserves measured in million barrels of oil equivalent (mmboe):
Market cap ($ in billion) 37.39 15.56
Revenue ($ in billion)
Production (mmboe) Domestic 136.6 61.3
International 21.1 41.9
Total 157.7 103.2
Proved plus probable reserves (mmboe) 3,640.3 1,745
Production forecasts (mmboe)
183-188 (2023) 84-90 (2024)
ASSETS AND PROJECTS
Woodside operates major liquefied (LNG) export facilities in Australia, including North West Shelf and Pluto LNG, and three floating production storage and offloading (FPSO) facilities in western Australia. The company also owns a stake in the Chevron-operated Wheatstone LNG project.
The company is involved in oil-gas joint ventures in the Bass strait and partners with Santos at Macedon, a gas field off western Australia. Woodside has been trying to sell ageing domestic oil and gas assets where production is declining and high decomissioning costs are required.
The company received approval for its Scarborough and Pluto Train 2 projects in Australia in 2021, with first LNG cargo expected in 2026.
Globally, Woodside operates in the U.S. Gulf of Mexico with three offshore platforms, as well as an offshore processing facility in Trinidad and Tobago.
In Senegal, Woodside is targeting first oil production at the Sangomar Field Development Phase 1 in 2024. Woodside has also made a final investment decision to develop the large, high-quality Trion resource in Mexico, with first oil output targeted for 2028.
Other Woodside projects include proposed hydrogen and ammonia projects H2Perth and H2TAS in Australia and another hydrogen project, H2OK, in North America.
Santos operates Gladstone LNG and holds a stake in Papua New Guinea LNG.
The company expects production at the Timor-Leste Bayu-Undan field to cease in 2025 and plans to backfill Darwin LNG with supply from the Barossa field.
Santos is the second-biggest producer of domestic gas in Western Australia and has invested in two offshore oil fields, Van Gogh and Pyrenees.
On the Australian east coast, Santos portfolio includes the Cooper and Eromanga Basins as well eastern Queensland production.
In the U.S., Santos is advancing its Pikka Phase 1 project in Alaska, expecting first oil production in 2026.
If the companies merge, they would have a 26% share of Australia’s east coast gas market.
Combined oil and gas production in 2022 for the two totaled slightly over 260 million barrels of oil equivalent (mmboe), and their total proven plus probable reserves are 5.39 billion mmboe, based on data from the companies.
The Australian Competition and Consumer Commission (ACCC) said on Thursday it would consider whether a public merger review into the impact on competition was required if the deal goes ahead.
“Given ACCC’s focus on East Coast gas, we expect a (merged company) may be a forced seller of the Cooper Basin,” Macquarie bank analyst Mark Wiseman said in a note.
($1 = 1.5154 Australian dollars)
Oil heads for seven week decline for first time in five years
© Reuters. An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Picture taken on November 12, 2021. Mandatory credit Kyodo/via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDE
By Paul Carsten
LONDON (Reuters) -Oil benchmarks were on track for a seven-week decline on Friday, their first in half a decade, on worries about a supply surplus and weak Chinese demand, though prices rebounded after Saudi Arabia and Russia lobbied OPEC+ members to join output cuts.
futures were up $1.51, or 2%, at $75.56 a barrel at 1234 GMT, while U.S. West Texas Intermediate crude futures were up $1.42, or 2%, to $70.76 a barrel. Brent had earlier risen by $2.
Both benchmarks slid to their lowest since late June in the previous session, a sign that many traders believe the market is oversupplied. Brent and WTI are also in contango, a market structure in which front-month prices trade at a discount to prices further out.
OPEC+’s “weakening position in providing support coupled with record high US production and sluggish Chinese import figures can only mean one thing: there is an abundance of oil available, which is neatly reflected in the contangoed structure of the two pivotal crude oil benchmarks,” said Tamas Varga of oil broker PVM in a note.
Friday’s gains, meanwhile, are a “correction and nothing else,” Varga said.
Saudi Arabia and Russia, the world’s two biggest oil exporters, on Thursday called for all OPEC+ members to join an agreement on output cuts for the good of the global economy, only days after a fractious meeting of the producers’ club.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed to a combined 2.2 million barrels per day (bpd) in output cuts for the first quarter of next year.
“Despite OPEC+ members’ pledges, we see total production from OPEC+ countries dropping by only 350,000 bpd from December 2023 into January 2024,” said Viktor Katona, lead crude analyst at Kpler.
Some members of OPEC+ may not adhere to their commitments due to muddied quota baselines and dependence on hydrocarbon revenues, Katona said.
Brent and WTI crude futures are on track to fall 4.2% and 4.5% for the week, respectively, their biggest losses in five weeks.
Fuelling the market’s downturn, Chinese customs data showed its crude oil imports in November fell 9% from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.
In the United States, output remained near record highs of more than 13 million bpd, U.S. Energy Information Administration data showed on Wednesday. [EIA/S]
The market is also looking for monetary policy cues from the official U.S. monthly job report due later today, which is expected to show November job growth improving and wages increasing moderately. That would cement views that the U.S. Federal Reserve is done raising interest rates this cycle.
In Nigeria, the Dangote oil refinery is set to receive its first cargo of 1 million barrels of crude oil later on Friday, the start of operations that, when fully running at 650,000 barrels a day, would turn the OPEC member into a net exporter of fuels after having been almost totally reliant on imports.
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