Oil prices fall as supply risk premium fades, demand outlook drags

US inventories may rise further over the near term, further pressuring prices, as American refiners curb runs for maintenance, analysts said. (Reuters)
Updated 27 September 2019

Oil prices fall as supply risk premium fades, demand outlook drags

  • A surprise 2.4 million-barrel build in US crude inventories last week also weighed on prices

SINGAPORE: Oil prices fell on Friday, erasing more of the gains realized after the Sept. 14 attacks on Saudi Arabian oil facilities, as the rapid return of production capacity from the world’s top exporter squashed risk premiums.
Prices were also pressured by worries of weak global economic growth and its effect on oil demand.
Brent crude futures fell 32 cents, or 0.5 percent, from the previous session’s close to $62.42 a barrel by 0131 GMT.
US West Texas Intermediate (WTI) crude futures fell 8 cents, or 0.1 percent, to $56.33 a barrel.
“For most of the week ... the market has been trading lower as oil bulls have been discouraged by the quicker-than-expected return of Saudi oil output,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.
WTI futures were down 3 percent so far for the week, marking the largest weekly loss in 10 weeks, while Brent was down 2.9 percent on the week, its largest weekly loss in seven.
Saudi Arabia had brought its production capacity back to 11.3 million barrels per day (bpd) less than two weeks after the attacks on it oil facilities, sources briefed on the matter told Reuters this week.
The attacks, which knocked out 5.7 million bpd of production, initially sent oil prices up 20 percent although they dropped soon after as the kingdom pledged to bring back output by the end of September.
A surprise 2.4 million-barrel build in US crude inventories last week also weighed on prices.
US inventories may rise further over the near term, further pressuring prices, as American refiners curb runs for maintenance, analysts said.
“The expected lower demand for oil inputs into (US) refineries typically sees US crude inventories swell, all of which could pose a significant downside risk for prompt oil prices,” Innes said.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.