|Day's range||54.11 - 54.68|
(Bloomberg) -- OPEC is poised to extend oil-output cuts for the rest of the year when its members meet next month to assess supply and demand for crude.Saudi Arabia, Iraq and the United Arab Emirates -- the group’s three biggest members -- all want to keep restraining production in a bid to buttress crude amid signs of faltering demand. Having resolved a month-long fracas over when to meet, the Organization of Petroleum Exporting Countries and its allies now look likely to roll over the cuts when they gather on July 1-2 in Vienna.“I am not expecting a very difficult process in approving the extension,” United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters on Wednesday in Abu Dhabi. Discussions at the July meeting will focus on the duration of the next agreement, he said.Al Mazrouei’s remarks echoed views expressed over the weekend by Saudi Energy Minister Khalid Al-Falih and earlier in the month by Iraqi Oil Minister Thamir Ghadhban. Russia, the largest producer outside OPEC, remains a question mark as it has yet to clarify whether it will join in any cuts.Market TurmoilThe producer coalition known as OPEC+ agreed earlier Wednesday to meet at the beginning of July. However, the group’s difficulty in picking a date highlighted political differences among its members and stoked turmoil in markets just weeks before their current production cuts expire. West Texas Intermediate for July delivery traded up 1.3% at $54.47 a barrel on the New York Mercantile Exchange as of 9:45 a.m. Thursday in Singapore.The threat of conflict in the Persian Gulf adds to market volatility. Tensions between Iran and the U.S. are escalating after attacks last week on oil tankers near the Strait of Hormuz. A rocket strike on Wednesday near an Exxon Mobil Corp. workers’ camp in Iraq had no effect on that nation’s oil fields or exports, according to a person with knowledge of the matter.OPEC’s Economic Commission Board, which met this week in Vienna, sees global oil inventories contracting by almost 500,000 barrels a day if the group continues to curb supply in the second half, a delegate said. That means that while they’re planning to extend their agreement to trim output, countries like Saudi Arabia -- which are making deeper cuts than promised -- will still have scope to pump more without violating the deal.“We are hoping that we will reach consensus to extend our agreement when we meet in two weeks time in Vienna,” Saudi Arabia’s Al-Falih told reporters on Sunday in Japan. The kingdom, OPEC’s biggest member, is seeking to balance global oil markets before 2020, he said.Iraq, OPEC’s second-largest producer, sees the group and its allies extending production cuts “at least” on current terms without “serious difficulties,” Ghadhban said on June 7 in St. Petersburg.(Updates oil price in fifth paragraph.)To contact the reporters on this story: Mahmoud Habboush in Abu Dhabi at firstname.lastname@example.org;Grant Smith in London at email@example.comTo contact the editors responsible for this story: Nayla Razzouk at firstname.lastname@example.org, Bruce Stanley, Mohammed Aly SergieFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Oil recovered to trade above $54 a barrel after a report showing a decline in U.S. crude supplies and record gasoline consumption and OPEC and its allies agreed an early July date to discuss extending production cuts.Futures in New York rose 0.9%, after ending 0.3% lower on Wednesday. The U.S. Energy Information Administration said domestic oil inventories fell by 3.1 million barrels last week, more than any of the 12 analysts in a Bloomberg survey expected. Demand for gasoline also hit a record 9.93 million barrels a day and stockpiles of the motor fuel unexpectedly declined.OPEC+ agreed to hold its next meeting on the first two days of July, ending weeks of speculation about whether the group of major producers could overcome divisions. Saudi Arabia, Iraq and the United Arab Emirates -- OPEC’s three biggest members -- all want to keep restraining production amid signs of faltering economic growth, according to statements in recent days.To contact the reporter on this story: James Thornhill in Sydney at email@example.comTo contact the editors responsible for this story: Ramsey Al-Rikabi at firstname.lastname@example.org, Keith GosmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Wyoming’s Powder River Basin has been generating some buzz in oil and gas circles as a potential source of new supply (as if oil and gas need that). On Wednesday, though, its real significance was as a strategic signpost.The PRB, as it is known, is more famous for coal; and two of the biggest miners, Peabody Energy Corp. and Arch Coal Inc., are throwing their lot there together. A planned joint venture will combine five mines in Wyoming and Colorado into a single operation producing more than 60% of the basin’s coal. It will be roughly two-thirds owned by Peabody, with Arch taking the rest.The PRB produces a cheaper form of coal, with lower energy content, relative to what comes out of Appalachia – and its market is crumbling. Cheap shale gas, renewable energy and flat consumption have cut coal use in U.S. power plants by almost 40% over the past decade. Despite creative attempts by the White House to reverse that trend, the Energy Information Administration expects it to drop by another 19% through the end of next year. Cloud Peak Energy Inc., which operates several PRB mines, is currently in chapter 11 – from which both Peabody and Arch have only emerged themselves within the past few years. And the combined output of their mines in Wyoming, which constitute the vast majority of the joint venture’s output, has dropped away:So Arch and Peabody want to get those assets together, squeeze out costs and try to be the last guy(s) standing. The two miners expect synergies they value at $820 million, or roughly a fifth of their combined market cap. That alone is reason to try. It also puts some distance between the PRB assets and the companies’ metallurgical-coal operations, where prospects (and profits) are better. This is a textbook deal for two commodity producers faced with terminal decline in their market. For Arch, it continues a strategy of rejecting the growth impulse that pushed much of this industry into chapter 11 within the past decade in favor of a more realistic approach that has shrunk the company. Arch has bought back almost a third of its stock in the past few years, generating healthy returns at odds with the industry’s broader fortunes (see this). The stock jumped as much as 8% on Wednesday morning and is close to its post-bankruptcy peak.Frackers in shale would do well to take this on board. Oil and gas markets aren’t facing the same pressure as U.S. thermal coal, but are also challenged. Natural gas demand isn’t growing quickly enough to absorb surging production; and neither is oil, judging from its comatose state in the face of all sorts of geopolitical provocations. Despite some consolidation, the Permian basin, especially, remains very fragmented, and legacies of poor returns and weak governance keep investors on the sidelines. Having shown some progress on living within their means last year, frackers once again outspent cash flow in the first quarter.Consolidation – especially in the form of nil-premium, all-stock deals – would go a long way to cutting the bloated overhead that comes from having dozens and dozens of companies targeting the same acreage. It’s not often a literal canary in the coal mine shows up, let alone two.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Despite OPEC oil production cuts and Venezuela and Iran sanctions, the world seems to be oversupplied with crude oil, with the excess amounting to some 90 million barrels above the average 2018 level
After two consecutive weeks of crude oil inventory builds, this week the Energy Information Administration offered some respite for prices with a draw, of 3.1 million barrels for the week to June 14
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't...
(Bloomberg) -- Global oil demand growth is slowing.That is the view of all three major oil forecasting organisations, who have cut their assessments for what they expect in terms of an increase in crude consumption this year. The latest outlooks from the International Energy Agency, the U.S. Energy Information Administration and the Organisation of Petroleum Exporting Countries all show worldwide oil demand growing by less than they did a month ago.Taking the average of the three agencies’ forecasts, they now expect demand for oil to grow by about 1.2 million barrels a day this year, compared with last. That’s down from 1.3 million a month ago and more than 1.4 million in their forecasts made in January.The slowing demand growth is creating a problem for the OPEC+ group of countries, who had hoped to be able to end their oil supply restraint this month. Instead, all three agencies agree that they will need to extend their output cuts at least until the end of the year, and possibly beyond.The IEA, EIA and OPEC all now see global oil stockpiles coming down this year, but only if production restraint continues.Projecting the most recent month’s OPEC crude production forward for the rest of the year gives a global stock draw of 160 million barrels, according to OPEC, but of only 24 million barrels, according to the IEA. Still, that’s better than a month ago, when the IEA still saw a small build in stockpiles this year.But there is a catch.The weakening demand outlook for 2019 is driven to some big downward revisions for the first half of the year, with year on year growth still seen robust in the second half. If assessments for the third and fourth quarters also start being revised down, then the OPEC+ group might need to cut output even further to keep supply and demand balanced.The IEA now says global oil demand expanded by just 250,000 barrels a day in the first quarter compared with the same period last year. That’s the slowest rate of growth since the final three months of 2011, when the initial effect of the post-financial-crash recovery was wearing off. The other two agencies don’t see the first quarter in such bleak terms, although both are moving in the same direction, cutting their assessments of demand growth for the period from last month’s levels.The two consumer-side agencies — the IEA and EIA — also see a much weaker picture emerging for the current quarter, a view that is not shared by OPEC – at least not so far.Temporary factors, such as mild temperatures across the Northern Hemisphere and widespread flooding across the U.S. Midwest hit American oil consumption in the first four months of the year. But demand is expected to recover “on the back of growth in the petrochemical industry and with higher gasoline consumption,” according to the IEA.That expectation of stronger year-on-year demand growth in the second half of 2019 is the only thing holding up the full-year figures. The IEA has raised its forecast of demand growth in the fourth quarter to a heady 1.78 million barrels a day, from the 1.29 million it saw in January. The EIA, which shared the IEA’s view in January, now sees fourth-quarter demand growth at 1.59 million barrels a day. The strength is based, in part, on the mandatory switch to low sulfur bunker fuels for ships that comes into effect at the start of next year.The IEA also published its first forecast for 2020 this month. It makes uncomfortable reading for oil producers, showing that global oil inventories will build at an average rate of 650,000 barrels a day next year, even if the OPEC producers keep output at the current level. That figure is broadly in line with a 550,000 barrels a day build seen by the EIA, which has been publishing 2020 forecasts since January. OPEC will push its own assessments forward to 2020 in its July report. Its outlook may not be any rosier. To contact the author of this story: Julian Lee in London at email@example.comTo contact the editor responsible for this story: Alaric Nightingale at firstname.lastname@example.org, John DeaneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Money managers have gotten increasingly bearish on crude oil futures, and as a result, a sudden change of sentiment in the markets could lead to a significant short-squeeze
Oil prices erased earlier losses and surged on Tuesday morning after U.S. President Donald Trump said that he would meet his Chinese counterpart next week to discuss the ongoing trade dispute
The decrease in the International Energy Agency’s demand growth forecast for 2019 and the expectation of a rise in the oil rig count might have dragged oil’s futures spread and prices.
Next week, the OPEC plus meeting will be important for the Brent-WTI spread. If OPEC and its allies increase the magnitude of the production cut, the Brent-WTI spread could rise.
On June 26, OPEC and its allies will meet in Vienna to decide about another production cut extension. With just over a week left before the meeting, there's still confusion about the date.
In the next quarter, the US crude oil production might rise—an important factor that might kill any upside in oil prices. For the week ending June 7, US crude oil's weekly production was near its record high of 12.3 MMbpd.
Investors need to pay close attention to Whiting Petroleum (WLL) stock based on the movements in the options market lately.
(Bloomberg) -- An obscure product made by oil refineries has a grim story to tell investors right now about the fortunes of the global economy.That product is naphtha, something used to make a vast array of goods while also being integral to churning out gasoline. Oil refiners’ margins from making it are the weakest in years in Europe and Asia. Unusually, some petrochemical plants in Asia have even been losing money when processing it.Signs of weakening manufacturing in China could scarcely have come at a worse time for the market, given a backdrop of surging U.S. shale oil and gas supply that’s flooded petrochemicals producers with the raw materials they need. With some of those plants undergoing maintenance, it’s little wonder the naphtha market is taking a hit.“Naphtha demand is simply very sensitive to economic sentiment and growth,” said Jan-Jacob Verschoor, London-based director of Oil Analytics Ltd., which keeps track of the margins of hundreds of oil refineries around the world. “The trade war with escalating tariffs, has killed manufacturing sentiment in the East, thereby weakening margins of petrochemical plants.”Naphtha rarely grabs headlines because it’s usually not consumed directly. Instead, refineries make it from crude oil and then use it to churn out gasoline. Likewise, petrochemical plants process it to make what ultimately becomes plastics and other manufacturing raw-materials. The fuel was on board a tanker recently attacked just outside the Persian Gulf, part of a spate of incidents targeting shipping in the region.The profits an oil refiner makes from turning crude oil to naphtha -- known as crack spreads in trader jargon -- are plunging. In Japan, a benchmark for the fuel in Asia, they slumped to the lowest in at least four years in recent weeks. Corresponding indicators in Europe also remain seasonally very weak, prompting speculation they could be encouraging some refiners to process less crude.Petchem SnubThe U.S.-China trade-spat appears to be hurting the Asian country’s economy, a vital driver of demand for naphtha. Retail sales there are at the lowest level in years while car sales have fallen for twelve straight months. China’s Manufacturing PMI index was at 49.4 points in May, the weakest for the time of year since at least 2005. Profits of petrochemical producers in the region have been withering.It’s not just demand that’s an issue. Naphtha competes with propane as a feedstock for petrochemical plants.Recent weakness in the price of the liquefied petroleum gas, another consequence of the U.S. energy boom, has heavily diminished the appeal of naphtha in the past five weeks, Hui Heng Tan, an analyst at Marex Spectron, wrote in research note dated June 10. With the U.S. exports of the LPG set to accelerate, petrochemical plants’ appetite for naphtha may not rebound anytime soon.Gasoline CoolsThe other market where naphtha is widely used -- gasoline -- is not picking up the slack created by weak petrochemicals demand.Normally, when there’s a spike in demand for gasoline, buying of naphtha typically picks up as it gets used as a blending stock, according to JBC Energy GmbH. However, a recent surge in gasoline prices in Europe didn’t result in a corresponding strengthening of naphtha margins -- a sign to the Vienna-based researcher of a particularly weak market.“This suggests to us that there is simply already a maximum volume of naphtha in the finished gasoline pool, meaning that naphtha is having to price in order to maintain its position in the petchem market,” JBC said.The naphtha market’s woes are also being caused in part by the type of crude the world is pumping these days.A surge in U.S. supply of low-density crude has meant refineries are processing more of it, resulting in extra naphtha and other light-end refined products. American shale oil production will surge this quarter, rising by 250,000 barrels a day compared with the first three months of the year, JBC said in a note Tuesday.Gasoline inventories in the U.S. Gulf of Mexico are at the highest for the time of year since at least 1990.With no signs of a U.S.-China trade deal in sight, and predictions that American crude production will only keep surging, the immediate future of the naphtha market looks precarious.“I don’t see a U.S.-China trade deal happening anytime soon”, said Steve Sawyer, a senior analyst at Facts Global Energy in London.“Naphtha cracks are set to remain weak till at least the end of the year.”(Updates with forecast for shale oil production in 14th paragraph.)To contact the reporters on this story: Prejula Prem in London at email@example.com;Jack Wittels in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Alaric Nightingale at email@example.com, Brian WingfieldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
While geopolitical tensions in the Middle East appear to be at the highest level in recent memory, the oil market is refusing to focus on anything other than fundamentals
The fundamentals seem to be heading in the wrong direction for oil prices, with demand weakening even as supply continues to exceed expectations
Saudi Energy Minister Khalid Al-Falih hinted at a delay of the upcoming OPEC meeting as key partner Russia has seemingly requested extra time
The Zacks Analyst Blog Highlights: PDC Energy, Exxon Mobil, AngloGold Ashanti, NovaGold Resources and VanEck Vectors Oil Refiners