Commodities
Oil prices settle lower but notch fourth-weekly gain on demand optimism
Investing.com — Oil prices notched a fourth-weekly despite settling lower Friday, as traders cheered signs earlier this week that usual pick in summer energy demand is underway at time when weather-related supply disruptions remain in focus.
At 14:30 ET (18:30 GMT), fell 1% to $86.54 a barrel, while fell 0.9% to $83.16 a barrel.
Crude prices were headed for a fourth week of strong gains, amid expectations that oil markets will tighten further in the coming months, although trading volumes were muted on account of the U.S. market holiday on Thursday.
Demand optimism in focus; Rig counts unchanged
U.S. travel demand in particular was a key source of this optimism, as analysts forecast record-high travel activity in the world’s biggest fuel consumer through the independence day week.
Bets on stronger demand were furthered by data showing a massive drawdown in U.S. over the past week, as fuel retailers prepared for holiday travel. This week is also expected to have seen sharp drawdowns in crude inventories.
On the supply front, meanwhile, the number of oil rigs remained at 479 from a week ago, Baker Hughes reported Friday. That is well below the 622 rig counts that were operating at the end of the last year, signaling no immediate rush from drillers to boost activity.
“Market sentiment has been supported this week by strong mobility indicators and intensifying geopolitical tension in the Middle East,” analysts at ANZ wrote in a note.
Persistent concerns over supply disruptions in the Middle East also saw traders attach a bigger risk premium to oil prices, as tensions between Israel and Lebanon’s Hezbollah showed little signs of easing.
OPEC oversupply, weak economic readings cool oil gains
But whether oil prices will push further remained doubtful, especially as recent data showed members of the Organization of Petroleum Exporting Countries had increased production in recent months, increasing the likelihood that markets become less tight later this year.
Concerns over slowing economic growth in major oil consumers the U.S. and China also remained in play, especially following weak readings on non-manufacturing purchasing managers index data.
Hawkish signals on U.S. interest rates from the Federal Reserve also factored into some market caution, while traders were on edge ahead of key data due later in the day, which is set to provide more cues on the U.S. economy.
Citi revisits its oil forecasts
Geopolitical tensions and extreme weather events remain risks for oil prices in the near term, according to analysts at Citi, in a note, pointing to conflicts in the Middle East and Hurricane Beryl as examples.
However, despite these factors supporting prices in the $80s a barrel currently, Citi sees reasons for a potential softening later in the year.
“Underlying physical market strength looks set to turn softer,” Citi stated, adding that while demand signals are mixed, with some bright spots like higher-than-expected gasoline demand in the US, it remains lower year-over-year.
Citi maintained its 3-month Brent price target of $82 per barrel, but lowered its 6-12 month target to $72 per barrel, citing a potential supply glut post-summer.
(Peter Nurse, Ambar Warrick contributed to this article.)
MOSCOW (Reuters) – Nearly 500,000 metric tons of Russian oil products are trapped on tankers hit by U.S. sanctions, LSEG data showed on Wednesday.
On Jan. 10, new Russia-related sanctions targeted more than 180 vessels and insurance companies, adding to the impact of similar restrictions imposed by United Kingdom (TADAWUL:) and Europe Union.
The vessels under the latest U.S. sanctions include nine tankers that loaded oil products at Russian Baltic and Black Sea ports in December and January.
Four of them – Cup, Aquatica, Turaco and Onyx – are carrying in total around 280,000 tons of fuel oil, destined for India, Turkey and Singapore, LSEG data shows.
Another of the tankers – Ariadne – was loaded in December with about 35,000 tons of naphtha in the Russian Baltic port of Ust-Luga. It is drifting near Egyptian port of Port Said, according to shipping data.
Four other vessels from the sanctions list are carrying in total around 160,000 tons of ultra-low sulphur diesel and gasoil of Russian origin.
One of those cargoes – Pravasi – is discharging at the Brazilian port of Santos. Three other vessels – Symphony, Jupiter and Talisman – are on their way to Turkey, according to LSEG data.
Although there is a transition period, allowing the discharge of cargoes that has already been agreed, traders said concern about penalties has slowed activity.
Since the sanctions were announced, at least 65 oil tankers have dropped anchor at multiple locations, including off the coasts of China and Russia, ship tracking data showed.
By Arunima Kumar
(Reuters) -Oil prices paused their rally on Tuesday, but remained near four-month highs, with the market’s attention focused on the impact of new U.S. sanctions on Russian oil exports to key buyers India and China.
futures slipped 54 cents, or 0.67%, to $80.47 a barrel by 1033 GMT, while U.S. West Texas Intermediate (WTI) crude fell 53 cents, or 0.67% to $78.29 a barrel.
Prices jumped 2% on Monday after the U.S. Treasury Department on Friday imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called “shadow fleet” of tankers.
“With several nations seeking alternative fuel supplies in order to adapt to the sanctions, there may be more advances in store, even if prices correct a bit lower should tomorrow’s U.S. CPI data come in somewhat hotter-than-expected”, said Charalampos Pissouros, senior investment analyst at brokerage XM.
The U.S. producer price index (PPI) will be released today, followed by the consumer price index (CPI) on Wednesday.
A core inflation rise above the 0.2% forecast could lower the likelihood of further Federal Reserve rate cuts, which typically support economic growth and could boost oil demand. [MKTS/GLOB]
While analysts were still expecting a significant price impact on Russian oil supplies from the fresh sanctions, their effect on the physical market could be less pronounced than what the affected volumes might suggest.
ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrel-per-day surplus they had forecast for this year, but said the real impact could be lower.
“The actual reduction in flows will likely be less, as Russia and buyers find ways around these sanctions,” they said in a note.
Nevertheless, analysts expect less of an supply overhang in the market as a result.
“We anticipate that the latest round of sanctions are more likely to move the market closer to balance this year, with less pressure on demand growth to achieve this,” said Panmure Liberum analyst Ashley Kelty.
Uncertainty about demand from major buyer China could blunt the impact of the tighter supply. China’s imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.
By Arathy Somasekhar
HOUSTON (Reuters) – Peru’s niche Bretaña is gaining popularity in the United States, with the first cargo discharging in the U.S. Gulf Coast this month as U.S. refiners seek alternatives for declining Mexican heavy crude.
Bretaña, a rare heavy sweet crude with minimal metals, is produced in the Peruvian side of the Amazon (NASDAQ:) rainforest. It is then barged along the Amazon river and loaded onto larger ships that depart from Brazil.
The vessel Radiant Pride transported about 300,000 barrels of Bretaña from Manaus, on the banks of the Negro river in Brazil, and discharged on Jan. 2 in Houston, ship tracking data from Kpler and LSEG showed.
The cargo was bought by oil major Shell (LON:), a source said. Shell declined to comment.
“Given the drop in heavy sour crude from Mexico to the U.S. Gulf Coast over the last year, we are starting to see new heavy grades being pulled in to backfill this loss – this is a trend we only expect to continue,” said Matt Smith, an analyst at Kpler.
U.S. imports from Mexico fell to their lowest on record in 2024 as the Latin American country’s oil production fell and a larger portion of output remained at home to be refined.
Two cargoes of Peru’s Bretaña, a relatively new entrant into the market since production began in 2018, discharged at the U.S. West Coast last year – one at Marathon Petroleum (NYSE:) and another at PBF Energy (NYSE:) terminals, the Kpler data showed.
Marathon Petroleum declined to comment. PBF Energy did not immediately reply to a request for comment.
PetroTal Corp, the producer of Block 95 where the Bretaña oilfield is located, bought the assets from Canadian producer Gran Tierra Energy (NYSE:) in 2017, and currently produces about 20,000 barrels of oil per day, according to Chief Executive Officer Manuel Zúñiga.
Challenges with transporting the crude via a pipeline operated by Peru’s state oil firm Petroperu led to a brief halt in exports between 2022 and 2024, Zúñiga said.
Petroperu has struggled in recent years to keep the line operational amid spills and social conflict interrupting its flow.
Three cargoes of Bretaña headed to the U.S. West Coast and one to the U.S. East Coast between 2020 and 2022, Kpler data showed.
About 90% of the Bretaña crude produced by PetroTal is exported, and the remaining is transported by barges to Petroperu’s refinery in Iquitos, Zúñiga said.
PetroTal has a contract with Houston-based Novum Energy under which Novum buys the crude for export and arranges its transportation, Zúñiga added.
Novum did not immediately respond to a request for comment.
While PetroTal hopes to increase production, permitting delays as well as reliance on barges are a current limitation, Zúñiga said.
“You need access to the pipeline,” Zúñiga said, adding that the company is working to secure use of the infrastructure.
Petroperu said last year that it would hold negotiations with producers in the Peruvian jungle so that they can use the pipeline with a fair rate to help cover operational costs.
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