World's Top Oil Trader Says No One Will Avoid Iran Sanctions

Global Stock Markets

The world’s top oil trader said it will be near impossible to avoid U.S. sanctions on Iran, suggesting Donald Trump’s attack on OPEC’s third-largest producer may have a bigger impact on the global crude market than many anticipate.

“For us it’s a real challenge,” Vitol Group Chairman Ian Taylor said on Friday at the St. Petersburg Economic forum, adding there are unanswered questions about Europe’s response, and whether the European Central Bank will “stand up” to Trump’s measures. "I personally think none of us will be able to get around it.”

President Donald Trump said May 8 he was withdrawing the U.S. from an international pact on Iran’s nuclear program and reimposing sanctions that will force other nations to cut purchases.

So far, there’s been little clarity about how his actions will impact the oil market because there’s less international support than last time. In particular, it’s been unclear by how much European refineries will cut purchases, if at all.

In the prior sanctions, which ran from 2012 to 2016, a handful of mostly Asian countries carried on purchasing but had to show the U.S. that they were lowering imports to avoid their banks losing access to America’s financial system. European purchasers all withdrew.

Taylor’s comments echo recent remarks by some of the world’s biggest oil companies and traders. Total SA CEO Patrick Pouyanne said nobody can have “any illusions” about European companies being exempt from U.S. sanctions.

Bob Dudley, his counterpart at BP Plc, said his company won’t test the waters when it comes to Iran sanctions.

This time around, Europe is pushing back against Trump’s sanctions, raising the question about whether the bloc will organize a way for imports to continue.

That would require a workaround in the financial market, and probably some new means of insuring tankers bringing cargoes from the Islamic Republic.

Oil price hits three-week high as glut drops

Oil Stock Markets

Global oil benchmark, Brent crude, rose to its highest level so far this month on Tuesday, as tension in the Middle East and the possibility of further falls in Venezuelan output helped offset the negative impact of growing United States’ crude production.

Brent, against which Nigeria’s crude oil is priced, increased by $1.75 to $67.80 per barrel as of 5:40pm Nigerian time, while the United States’ West Texas Intermediate stood at $63.78 per barrel.

The rise in oil prices means accretion to the Excess Crude Account, into which the country saves the difference between the market price of oil and the budget benchmark to provide a cushion when oil prices fall or extra cash is needed for spending on infrastructure.

Saudi Arabia called the 2015 nuclear deal between Iran and world powers a “flawed agreement” on Monday, on the eve of a meeting between the Saudi crown prince and US President Donald Trump. Both are highly critical of Iran.

Trump has threatened to withdraw the US from the accord between Tehran and six world powers, raising the prospect of new sanctions that could hurt Iran’s oil industry.

Worries about falling production in Venezuela, whose output has been halved since 2005 to below two million barrels per day due to an economic crisis, also supported oil markets.

The International Energy Agency said last week that Venezuela was “vulnerable to an accelerated decline” and said such a disruption could tip global markets into deficit.

PVM’s Varga said Venezuela was a potential source of supply disruption, adding that the bigger challenge for the Organisation of Petroleum Exporting Countries and its allies was ensuring that their efforts to balance the market through output curbs was not undermined by rising production elsewhere.

Oil Trades Near $57 as U.S. Crude Stockpiles Seen Extending Drop

Global Stock Markets

Oil traded near $57 a barrel for a third day before data expected to show that surplus crude inventories in the U.S. continued to diminish as global markets rebalance.

Futures rose 0.5 percent in New York after slipping 0.2 percent on Monday. Inventories probably lost 3 million barrels last week, according to a Bloomberg survey before Energy Information

Administration data Wednesday. Nigerian oil workers suspended strike action and agreed to continue talks next month, while output from a Libyan field returned to normal after a power outage

Oil has rallied the past three months as the Organization of Petroleum Exporting Countries and its allies reduce supply to drain a global glut. The unprecedented cooperation among producers, which has now been extended until the end of 2018, has crude prices on their way to a second annual advance.

West Texas Intermediate for January delivery, which expires Tuesday, added 31 cents to $57.47 a barrel on the New York Mercantile Exchange. Total volume traded was about 46 percent below the 100-day average. The more-active February futures rose 30 cents to $57.52 at 9:41 a.m. in London.

Brent for February settlement rose 19 cents to $63.60 a barrel on the London-based ICE Futures Europe exchange after rising 0.3 percent on Monday. The global benchmark traded at a premium of $6.05 to February WTI.

U.S. crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, probably fell by 2.2 million barrels last week, according to a forecast compiled by Bloomberg. That would be a sixth weekly drop, the longest run since July, according to EIA data.
Oil-market news:

Shale output at major U.S. fields is projected to reach 6.41 million barrels a day next month, according to the EIA’s monthly Drilling Productivity Report. The EIA boosted its December estimate to 6.31 million a day.

Futures fall on weaker oil prices; inflation data eyed

US Stock Markets

U.S. stock futures pointed to a more than 100-point fall in the Dow Jones Industrial Index at opening on Wednesday as a slide in oil prices hit global markets and concerns about the fate of U.S. tax cuts continued to weigh on the mood. 

Oil prices slipped for the fourth day running after the International Energy Agency issued a gloomy outlook for demand. Oil majors Exxon (XOM.N) and Chevron (CVX.N) were down about 0.7 percent in premarket trading.

Among other early decliners, Target (TGT.N) slipped 3.5 percent after the retailer’s holiday-quarter profit forecast looked weaker than Wall Street estimates.

IBM (IBM.N) fell more than 1 percent after Warren Buffett’s Berkshire Hathaway cut its stake in the company by 32 percent.

Snap (SNAP.N) was down 2 percent after shareholders including T. Rowe Price and Soros Fund slashed stakes in the Snapchat maker.

With the quarterly earnings season winding down, the market has taken a breather after a rally to record highs last week. Traders also await October inflation and retail sales reports due at 8:30 a.m. ET (1230 GMT).

Core inflation is forecast to rise 0.2 percent compared with a 0.1 percent increase in September, while monthly retail sales for October are seen unchanged.

Shanghai nickel and zinc tumbled alongside steel, with the commodities still reeling after indicators on Tuesday pointing to slowing industrial output growth in China. MET/L

Futures snapshot at 6:45 a.m. ET:

Dow e-minis 1YMc1 were down 119 points, or 0.51 percent, with 35,242 contracts changing hands.

S&P 500 e-minis ESc1 were down 12.75 points, or 0.49 percent, with 228,022 contracts traded.

Nasdaq 100 e-minis NQc1 were down 30.5 points, or 0.48 percent, on volume of 38,113 contracts.

Oil slips on worries Mideast rift could undermine OPEC cuts

Oil prices fell further below $50 a barrel on Tuesday on concerns that a diplomatic rift between Qatar and several Arab states including Saudi Arabia could undermine efforts by OPEC to tighten the market.

Benchmark Brent crude oil LCOc1 was 15 cents a barrel lower at $49.32 by 0755 GMT, down around 8 percent from the open of futures trading on May 25, when an OPEC-led policy to cut oil output was extended into the first quarter of 2018.

Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.

Steps taken include preventing ships coming from or going to the small peninsular nation from docking at Fujairah, in the UAE, used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.

With oil production of about 620,000 barrels per day (bpd), Qatar is one of the smallest crude producers in the Organization of the Petroleum Exporting Countries, but some investors fear tension within the cartel could weaken its agreement to hold back production in order to prop up prices.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said there was "a real chance" OPEC solidarity surrounding its production cuts may fracture.

"The OPEC agreement stands and is highly unlikely to change because of tension with Qatar. Crude production in the Middle East will not change because of Qatar," said Oystein Berentsen, managing director for oil trading company Strong Petroleum.

Oil prices drop amid glut concerns, U.S. withdrawal from climate deal

Oil prices tumbled below $50 on Friday amid worries that U.S. President Donald Trump's decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply.

Global benchmark Brent crude futures LCOc1 was down 1.7 percent, or 80 cents, at $49.75 a barrel, as of 0725 GMT.

U.S. West Texas Intermediate crude CLc1 futures dropped 87 cents, or 1.81 percent, to $47.46 per barrel.

Commodity markets were absorbing news the United States would withdraw from the landmark 2015 global agreement to fight climate change, a move that fulfilled a major campaign pledge but drew condemnation from U.S. allies.

Surging U.S. production has put a strain on OPEC members' efforts to curb production to drain a global crude supply overhang.

A week ago, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC members met in Vienna to roll over an output cut deal to reduce 1.8 million barrels per day (bpd) until the end of next March.

Russian Deputy Prime Minister Arkady Dvorkovich said on Friday he did not think that the global output cut agreement would be altered should prices go lower.

Russia's Rosneft CEO Igor Sechin also said the market cannot stabilize unless all producers cut output.

Oil prices are down some 7.5 percent since OPEC's May 25 decision to extend the cuts.
Faced with lingering glut woes, the oil cartel also discussed last week reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, according to sources.

But oil markets were offered some support by official data that showed crude inventories in the United States, the world's top oil consumer, fell sharply last week as refining and exports surged to record highs.

Crude stockpiles were down by 6.4 million barrels in the week to May 26, beating analyst expectations for a decrease of 2.5 million barrels.

OPEC sees more oil supply outside the group, countering its cuts

OPEC on Thursday sharply raised its forecast for oil supply from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, hampering the producer group's efforts to clear a glut and support prices by cutting output.

In a monthly report, the Organization of the Petroleum Exporting Countries said outside producers would boost supply by 950,000 barrels per day (bpd) this year, up from 580,000 bpd expected previously.

The 13-country OPEC is curbing its output by about 1.2 million bpd from Jan. 1 for six months, the first reduction in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much.

The report will add to a debate about the effectiveness of the cut, which is expected to be extended when producers meet later this month. While oil prices have gained support, higher rival supply is limiting further gains and an inventory glut has proved slow to shift.

Oil prices pared gains on Thursday after the release of the report to trade at less than $51 a barrel LCOc1, below the $60 level that top OPEC producer Saudi Arabia would like to see. Prices are still up from about $48 a year ago.

In the report, OPEC pointed to continued high compliance by its members with the supply deal and said oil stocks in industrialized nations fell in March - although they are still 276 million barrels above the five-year average.

Supply from the 11 OPEC members with production targets under the accord - all except Libya and Nigeria - fell to 29.674 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.

That means OPEC has complied 111 percent with the plan, according to a Reuters calculation, up from an estimate in March of 104 percent. OPEC did not publish a compliance number.

Oil gives up earlier gains as rising U.S. output, China concerns weigh

Oil prices gave up earlier gains on Tuesday, as concerns over slowing demand and a relentless rise in U.S. crude output undermined the impact of hopes that OPEC-led production cuts could be extended.

Brent crude futures, the international benchmark for oil prices, were at $49.33 per barrel at 0651 GMT on Tuesday, down from a high of $49.60 earlier in the day and near their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $46.40 per barrel, down from an intra-day high of $46.66 and also little changed from their last settlement.

Traders said that oil markets were under pressure as persistent climbs in U.S. production, especially from shale oil drillers, and concerns over a slowdown in China undermine efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to prop up prices.

U.S. crude production has risen by over 10 percent since mid-2016 to 9.3 million bpd, close to the output of top producers Russia and Saudi Arabia.

U.S. bank Goldman Sachs said that U.S. shale drillers "fundamentally changed" the oil industry due to their ability to ramp up output much faster than conventional producers.

Bank of America Merrill Lynch said the low oil prices were also due to a slowdown in demand.
"Oil demand growth this year is underwhelming, in part explaining why crude oil prices and refining margins have sold off sharply recently," it said.

A cornerstone of the Saudi promise to rebalance the market would be to extend, potentially into 2018, a pledge led by OPEC and other producers including Russia to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

OPEC oil output falls in April but compliance weakens - Reuters survey

OPEC oil output fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target while maintenance and unrest cut production in exempt nations Nigeria and Libya.

But more oil from Angola and higher UAE output than originally thought helped OPEC compliance with its production-cutting deal slip to 90 percent from a revised 92 percent in March, according to Reuters surveys.

The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from Jan. 1 - the first supply cut deal since 2008. Non-OPEC producers are cutting about half as much.

OPEC wants to get rid of excess supply that is keeping oil LCOc1 below $52 a barrel, half the level of mid-2014. With the oversupply proving hard to shift, OPEC is expected to prolong the agreement.

Compliance of 90 percent is still higher than OPEC achieved in its last cut in 2009, Reuters surveys show. Analysts including those at the International Energy Agency have put adherence in 2017 even higher, with the IEA calling it a record.

Other, small increases came from Kuwait and Saudi Arabia, the survey found, although their compliance was the second-highest and highest respectively in OPEC.

Even with April's increase, the total curb achieved by OPEC's top producer Saudi Arabia is 574,000 bpd, well above the target cut of 486,000 bpd.

Output in the United Arab Emirates fell, but production in March was higher than originally thought. The UAE, which has been focusing on expanding oil capacity in recent years, has been slower than other Gulf members to trim supply.

The UAE says it is complying 100 percent. It has blamed suggestions that it is failing to do so on discrepancies between its own production figures and those estimated by the secondary sources that OPEC uses to track compliance.

Lower output in Nigeria and Libya, which are exempt from the curbs, helped bring down overall OPEC production.

OPEC announced a production target of 32.5 million bpd at its Nov. 30 meeting, which was based on low figures for Libya and Nigeria and included Indonesia, which has since left the group.

The Libyan and Nigerian reductions mean OPEC output in April averaged 31.97 million bpd, about 220,000 bpd above its supply target adjusted to remove Indonesia.

Oil prices claw back ground after sharp drop, buoyed by U.S. crude stock dip

Oil prices regained some ground on Thursday after steep losses the previous day, with a slight drop in U.S. crude inventories stoking hopes that a push to rein in global oversupply could be gathering at least some momentum.

Brent crude futures were at $53.31 per barrel at 0108 GMT, up 38 cents, or 0.72 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures had risen 31 cents, or 0.61 percent, to $50.75 a barrel.

Traders said that the gains came on the back of a reduction in commercial U.S. crude stocks, which fell by 1 million barrels last week to 532.34 million barrels, according to the U.S. Energy Information Administration (EIA). However, that level was still near a record high.

Price increases came after both crude benchmarks fell over 3.5 percent the previous day following a report of surging gasoline inventories as well as another rise in U.S. crude oil production to 9.25 million barrels per day (bpd), up almost 10 percent since mid-2016.

U.S. gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.

Undaunted by oil bust, financiers pour billions into U.S. shale

Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry's resurgence.

In the first quarter, private equity funds raised $19.8 billion for energy ventures - nearly three times the total in the same period last year, according to financial data provider Preqin.

The quickening pace of investments from private equity, along with hedge funds and investment banks, comes even as the recovery in oil prices CLc1 from an 8-year low has stalled at just over $50 per barrel amid a stubborn global supply glut.

The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions - slashing up to half the cost of pumping a barrel in the past two years. Investors also believe the glut will dissipate as demand for oil steadily rises.

That gives financiers confidence that they can squeeze increasing returns from shale fields - without price gains - as technology continues to cut costs. So they are backing shale-oil veterans and assembling companies that can quickly start pumping.

Data on investments by hedge funds and other nonpublic investment firms is scant, but the rush of new private equity money indicates broader enthusiasm in shale plays.

"Demand for oil has been more robust than anyone imagined three years ago," said Mark Papa, chief executive of Centennial Resource Development Inc (CDEV.O).

Papa referred to the beginning of an international oil price crash in 2014, which took many firms in the shale sector to the brink of bankruptcy.

Centennial is a Permian oil producer backed by private equity fund Riverstone. Papa, a well-known shale industry entrepreneur, built EOG Resources Inc (EOG.N) into one of the most profitable U.S. shale producers before he retired in 2013.

Oil jumps in knee-jerk reaction after U.S. launches missile strikes at Syria

Oil futures surged more than 2 percent to a one-month high on Friday after the United States launched dozens of cruise missiles at an airbase in Syria, with prices later dropping back as there seemed no immediate threat to supplies.

U.S President Donald Trump said he had ordered missile strikes against a Syrian airfield from which a deadly chemical weapons attack was launched earlier this week, declaring he acted in America's "national security interest" against Syrian President Bashar al-Assad.

After tepid trading before the attack, Brent crude futures LCOc1 jumped to $56.08 per barrel, in what traders called a knee-jerk reaction, before easing to $55.62 per barrel at 0704 GMT, still up 1.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 also climbed by more than 2 percent, to a high of $52.94 a barrel, before receding to $52.46, up 1.45 percent.

Although Syria has limited oil production, its location in the Middle East and alliances with big oil producers raised worries about spreading conflict that could disrupt crude shipments.

The strikes also rattled global markets. While safe-haven products like gold jumped XAU=, stock markets and the U.S. dollar .DXY slumped.

In oil supply fundamentals, markets remained oversupplied, even with efforts led by the Organization of Petroleum Exporting Countries (OPEC) to cut supplies to prop up prices.

Oil trading data in Thomson Reuters Eikon shows that globally shipped crude volumes stood at 1.4 billion barrels in March (around 45.6 million bpd), up from 1.1 billion barrels in February, although on a daily basis the figure was similar to February's 45.5 million bpd due to that month's fewer days.

Shipped oil flows also remain higher than at any time during the second half of 2016, before the OPEC-led cuts were implemented, implying either poor compliance with the supply reductions, or plentiful alternative supplies.