Crude Oil Futures: Extra weakness not ruled out

CME Group’s flash data for crude oil futures markets noted traders reduced their open interest positions for the fourth consecutive session on Thursday, this time by around 5.5K contracts. Volume followed suit and reversed two straight builds and shrank by around 184.3K contracts.

WTI could retest monthly lows near $76.00

Prices of the barrel of WTI charted and inconclusive session on Thursday. The move was on the back of declining open interest and volume and exposes some lack of direction in the very near term, while the resumption of the previous downtrend should not be ruled out. Against that, another visit to the September low at $76.28 (September 26) remains in the pipeline.

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Crude Oil Edges Higher; China Stimulus Boosts Sentiment

Oil prices edged higher Thursday, on course for strong weekly gains as China attempted to boost demand while global supply remained very tight.

By 08:40 ET (12:40 GMT), U.S. crude futures traded 0.1% higher at $94.94 a barrel, while the Brent contract rose 0.4% to $101.67. Both contracts are on course for weekly gains of around 5%.

U.S. Gasoline RBOB Futures were up 0.2% at $2.8053 a gallon.

The Chinese government announced plans earlier Thursday to top up its economic stimulus to 1 trillion yuan (around $150 billion).

This attempt, to try and restore an economy ravaged by drought and COVID-19 restrictions, has been well-received by the oil market, given China is the largest oil importer in the world.

This news has added positive momentum to a market that had already been boosted by the release of data by the Energy Information Administration showing that U.S. crude inventories fell by much more than expected last week.

The volume of crude and its products exported from the U.S. last week was the highest in a series going back to February 1991.

"EIA numbers released yesterday were fairly constructive," said analysts at ING, in a note. "U.S. commercial crude oil inventories fell by 3.28MMbbls over the last week. However, when taking into account releases from the strategic petroleum reserve, total U.S. crude oil inventories declined by a significant 11.37MMbbls."

Additionally, earlier the week, Saudi Energy Minister Prince Abdulaziz bin Salman flagged the possibility that the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, could cut production, boosting the market.

He added that futures prices, which have fallen over 25% from their peaks earlier in the summer, are failing to reflect the tightness of the physical market.

Elsewhere, investors are also watching for progress on the revival of a nuclear deal with Iran, which could lead to the resumption of crude exports into the global market from the OPEC producer.

"The U.S. finally replied to the EU’s proposal for reviving the deal," ING added. "And while clearly, negotiations appear to be moving in the right direction, the US has said that "we’re not there yet" and that there are still "gaps" that remain."

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Russia suspends oil exports via southern leg of Druzhba pipeline – Reuters

Citing two sources familiar with the operation, Reuters reported on Tuesday that Russia suspended oil exports via the southern leg of the Druzhba pipeline from early August due to issues relating to transit fees.

"According to the sources, the payment from Russia's pipeline monopoly Transneft to Ukraine's pipeline operator Ukrtransnafta did not go through," Reuters explained.

Market reaction

Crude oil prices rose sharply with the initial reaction to this development. As of writing, the barrel of West Texas Intermediate was trading at $91.85, where it was up 1.55% on a daily basis.

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Oil up over $2/bbl as hopes fade for OPEC+ supply boost

Oil prices settled up more than $2 a barrel on Friday as attention turned to next week's OPEC+ meeting and dimming expectations that the producer group will imminently boost supply.

Brent crude futures contract for September, which expire on Friday, jumped more than $3 a barrel during the session and then pared gains to settle at $110.01 a barrel, up $2.87, or 2.7%. The more active October contract was up $2.14, or 2.1%, at $103.97.

U.S. West Texas Intermediate (WTI) crude futures settled at $98.62 a barrel, rising $2.20, or 2.3%, after jumping more than $5 a barrel.

Both contracts logged their second monthly losses, with Brent down about 4% for July and WTI nearly 7% lower.

Oil pared some gains after the release of data from oil services firm Baker Hughes, which showed that U.S. drillers added crude rigs for a record 23 months in a row, indicating more supply ahead. [RIG/U]

In July, the oil rig count rose 11, increasing for a record 23rd month in a row, while the gas count was unchanged after rising for 10 straight months, the Baker Hughes data showed.

Stronger stock markets supported oil, as did a weaker dollar, which makes oil cheaper for buyers with other currencies.

"These days, there has been a lot of macro influences on the oil market with the stock market making a nice rebound and a similar fall in the dollar feeding into (today's prices)," said John Kilduff, partner at Again Capital LLC.

Global equities, which often move in tandem with oil prices, were up on the hope that disappointing growth figures would encourage the U.S. Federal Reserve to ease up on monetary tightening. [MKTS/GLOB]

A Reuters survey forecast Brent would average $105.75 a barrel this year with U.S. crude averaging $101.28. [OILPOLL]

Front-month Brent futures are selling at a rising premium to later-loading months, a market structure known as backwardation, indicating tight current supply.

"The oil market in Europe is considerably tighter than in the U.S., which is also reflected in the sharply falling Brent forward curve," said Commerzbank (ETR:CBKG) analyst Carsten Fritsch.

Investors will next watch the Aug. 3 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+.

OPEC+ sources said the group will consider keeping oil output unchanged for September with two saying a modest increase would be discussed.

A decision not to raise output would disappoint the United States after President Joe Biden visited Saudi Arabia this month hoping for a deal to open the taps.

Analysts said it would be difficult for OPEC+ to boost supply, given that many producers are already struggling to meet production quotas.

OPEC+ compliance with oil output cut pledges reached 320% in June, Russian Interfax news agency reported, citing a source familiar with the data. It said the group's combined oil underproduction was 2.84 million barrels per day last month.

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Oil prices rise as tight supply counters China COVID, recession worries

LONDON (Reuters) -Oil prices rose on Tuesday as tight global supply outweighed worries that fuel demand would be hit by a possible recession and fresh COVID-19 curbs in China.

Brent crude futures rose 88 cents, or 0.7%, to $123.15 a barrel at 0824 GMT, while U.S. West Texas Intermediate (WTI) crude rose 88 cents, or 0.7% to $121.81 a barrel.

Tight supply has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports.

Other OPEC+ producers are struggling to meet their production quotas and Russia faces bans on its oil over the war in Ukraine.

"The continuing squeeze on refined products globally, as well as a lack of investment to bring online more supplies from OPEC members, or other sources, means lost Russian production is nowhere near being covered by global markets," said Jeffrey Halley, senior market analyst at OANDA, in a note.

UBS raised its Brent price forecast to $130 a barrel for end-September and to $125 for the subsequent three quarters, up from $115 previously.

"Low oil inventories, dwindling spare capacity, and the risk of supply growth lagging demand growth over the coming months have prompted us to raise our oil price forecast," the bank said.

The market will be awaiting weekly U.S. inventory data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday for a view of how tight crude and fuel supply remain.

Six analysts polled by Reuters expect U.S. crude inventories to have fallen by 1.2 million barrels in the week to June 3 with gasoline stockpiles up by about 800,000 barrels and distillate inventories, which include diesel and heating oil, unchanged.

On the demand side, China's latest COVID outbreak traced to a bar in Beijing has raised fears of a new phase of lockdowns just as restrictions in the country were being eased and fuel demand was expected to firm.

The Chinese capital's most populous district, Chaoyang, kicked off a three-day mass testing campaign among its roughly 3.5 million residents on Monday.

About 10,000 close contacts of the bar's patrons have been identified, and their residential buildings put under lockdown.]

Looking ahead, oil prices may face pressure if the U.S. Federal Reserve surprises markets with a higher-than-expected interest rate hike to tame inflation when it meets on June 14-15.

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 Crude Oil Futures: Further downside looks unlikely

CME Group’s flash data for crude oil futures markets showed investors trimmed their open interest positions by around 3.4K contracts at the beginning of the week, adding to the previous daily drop. Volume, instead, increased for the fourth session in a row, now by around 160.2K contracts.

WTI: Next support comes at $100.30

Prices of the barrel of WTI dropped sharply on Monday against the backdrop of shrinking open interest. That said, extra losses appear out of favour in the very near term, while prices of the commodity remain well supported by the so far May low near the $100.00 mark per barrel.

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Crude Oil Futures: Rising bets for further upside

Open interest in crude oil futures markets went up for the third consecutive session on Thursday, now by nearly 19K contracts according to advance prints from CME Group. Volume followed suit and rose by 157.3K contracts, fading the previous day’s retracement.

WTI now targets April tops around $109.00

Prices of the WTI extended the weekly recovery on Thursday. The move was accompanied by rising open interest and volume, paving the way for the continuation of this bounce to, initially, the April high just above the $109.00 mark per barrel in the very near term.

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Oil rebounds as supply concerns dominate

Oil prices rebounded on Wednesday as a drop in U.S. oil inventories and concerns over tighter supplies from Russia and Libya drove a recovery from the previous session's sharp losses.

Brent crude futures rose $1.46, or 1.4%, to $108.71 a barrel by 1139 GMT.

The front-month WTI crude futures contract, which expires on Wednesday, rose $1.50, or 1.5%, to $104.06 while the second-month contract gained $1.52 to $103.57.

The two main benchmarks had fallen by 5.2% in volatile trading on Tuesday after the International Monetary Fund (IMF) cut its forecast global growth forecast by nearly a full percentage point, citing the economic impact of Russia's war in Ukraine and warning that inflation had become a "clear and present danger" for many countries.

"Weakening growth and mounting inflationary pressure can only mean one thing: the spectre of stagflation is hanging over the global economy," said P.M analyst Stephen Greenock.

Global oil prices have been pulled higher by a tighter supply outlook after sanctions against Russia - the world's second-largest oil exporter and a key European supplier - over its invasion of Ukraine, which Moscow calls a "special operation".

However, a softer global economic outlook and continuing COVID lockdowns in China have hurt demand in the world's top crude importer and are weighing on prices.

On the supply side, the Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, produced 1.45 million barrels per day (bpd) below its production target in March as Russian output began to decline after sanctions imposed by the West, a report from the producer alliance showed.

Various outages added to concerns about supply. OPEC member Libya has been forced to shut in 550,000 bpd of output because of a wave of blockades on major oilfields and export terminals, the country's National Oil Corporation said on Wednesday. [nL5N2WI2QZ]

The Caspian Pipeline Consortium's (CP) Black Sea terminal could return to full capacity as early as Wednesday, Kazak Energy Minister Bloat Akchulakov said. The CP pipeline and terminal, which ship about 80% of Kazak crude exports, have been working at half usual capacity after a storm damaged two of its three mooring points last month.

In the United States, crude stocks fell by 4.5 million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday. [EA/IS]

The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, will release its weekly data at 10:30 a.m. EDT (1430 GMT) on Wednesday.

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Oil prices edge higher with falling supplies in focus

Oil prices edged higher on Wednesday after Moscow said that peace talks with Ukraine had hit a dead end, fuelling supply worries, while weak economic data from China and Japan kept a lid on gains.

Brent crude rose by 48 cents, or 0.5%, to $105.12 a barrel by 0808 GMT while U.S. West Texas Intermediate (WTI) crude futures gained 28 cents, or 0.3%, to $100.88. Both benchmarks had surged by more than 6% on Tuesday.

"The downside for oil prices is limited," said OANDA senior market analyst Jeffrey Halley, citing the Russian comments on peace talks and U.S. President Joe Biden accusing Russia of genocide. These "are reinforcing that the Ukraine-Russia situation will not be de-escalating any time soon".

Russian President Vladimir Putin on Tuesday blamed Ukraine for derailing peace talks and said Moscow would not let up on what it calls a "special operation" to disarm its neighbour.

Crude futures are also drawing support from Russian oil and gas condensate production falling to below 10 million barrels per day (bpd) on Monday, its lowest since July 2020.

The International Energy Agency (IEA) on Tuesday said it expected Russian oil output losses to average 1.5 million bpd in April, with losses growing to close to 3 million bpd from May.

Western sanctions against Russia and logistical constraints have hampered trade, people familiar with the data said on Tuesday.

OPEC has warned that it would be impossible to replace potential supply losses from Russia and signalled that it would not pump more crude.

Reports this week of partial easing of some of China's tight COVID-19 lockdown measures also underpinned oil prices.

Price gains, however, were kept in check by weak data from China and Japan.

China's crude oil imports slipped 14% from a year earlier, extending a two-month slide, as strict coronavirus restrictions hit demand in the world's top crude importer.

Japan reported its biggest monthly fall in core machinery orders in nearly two years, dragged down by a steep drop in demand from IT and other service companies.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday cut its forecast for 2022 global oil demand growth, citing the impact of Russia's invasion of Ukraine, rising inflation as crude prices soar and the resurgence of the Omicron coronavirus variant in China.

OPEC now expects global demand to grow by 3.67 million bpd in 2022, down 480,000 bpd from its previous forecast.

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