Oil Falls To A Fresh 1-Month Low

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Oil prices fell down once again after bouncing back overnight in U.S. trading, falling to a fresh 1-month low following data showed a surprise build in U.S. crude stockpiles and the return of more Nigerian crude to an already oversupplied market.

The oil price has slipped below $50 a barrel despite a pledge by the world’s largest exporters to extend an existing output cut of 1.8 million barrels per day (bpd) into next year in an effort to cut down bulging global inventories.

The U.S. West Texas Intermediate crude July contract was at $45.45 a barrel by 8:2 AM EDT, down 24 cents, or 0.55%, after hitting its lowest since May 5 at $45.34.

Meanwhile, Brent Oil for August delivery on the ICE Futures Exchange in London plummeted 25 cents, or 0.54% to 47.81 a barrel. The global benchmark dropped to as low as $47.65 earlier in session, a level not seen since May 5.

Unexpected surge in U.S. crude stockpiles

Oil prices plunged to their lowest level in about a month on Wednesday after data showed that U.S. crude stockpiles unexpectedly climbed for the first time in nine weeks.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories increased by 3.3 million barrels in the week that ended on June 2, disappointing expectations for a crude-stock decline of 3.4 million barrels.

Gasoline inventories also increased by 3.3 million barrels. For distillate inventories including diesel, the EIA reported a rise of 4.4 million barrels.

Supply Gloom Caps Gains

Addition to concern about supply outstripping demand, Royal Dutch Shell on Wednesday lifted force majeure on exports of Nigeria’s Forcados crude, bringing all the country’s oil grades fully online for the first time in almost one and a half year.

The market has also come under pressure from news of rising output from Libya, which together with Nigeria is exempted from the production cut made by the Organization of the Petroleum Exporting Countries and its 11 partners.

“I’ve been quite bullish for the second half of this year, based on supply and demand balances and I would still not give up on that idea, that rebalancing is going to start in the second half,” said Tamas Varga, an oil strategist.

“But if Nigerian and Libyan production is picking up as well as they are now, then slowly, I am probably going to have to start changing my mind.”

Glut Concerns Weigh

Meanwhile, investors kept weighing the effect of diplomatic tensions between Qatar and other Middle Eastern nations, including Saudi Arabia, on an OPEC-led push to tighten up the market.

With oil production of about 620,000 barrels per day, Qatar’s crude production ranks as one of the smallest among OPEC producers, but tension within the cartel could deteriorate an agreement to hold back production in order to bolster prices.

Last month, OPEC and some non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018.

Concerns that the current rebound in U.S. shale production could upset efforts by other major producers to bring balance back to global oil supply and demand remained in focus.

Elsewhere On Nymex

Gasoline futures for July dropped down 0.7% to $1.491 a gallon, while July heating oil subtracted 0.2% to $1.413 a gallon. Natural gas futures for July delivery also dropped down 0.4% to $3.008 per million British thermal units, as traders anticipate the weekly storage data due later in the global day.

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Commodity Currencies Inch Higher As Oil Slumps

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Currencies linked to commodity or oil-linked currencies such as the Canadian dollar, New Zealand dollar, Russian ruble and the Norwegian krone inched higher as oil prices slumped.

The Canadian dollar was last trading up 0.20% at C$1.3460 per U.S. dollar, down from a five-week high of C$1.3388 touched on Thursday. New Zealand dollar surged back 0.30% to $0.7045 after slipping 0.34% earlier. The Russian ruble and the Norwegian krone rose 0.51% and 0.17% to $0.01766 and $0.1193 respectively.

Oil Prices Slumped

Battered oil prices slumped on Friday after tumbling 5% in the previous session.

On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to extend a deal to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018, disappointing investors who are betting on longer or larger edges.

Brent crude futures were down from their last close 1.01% to $50.94 per barrel at 8:06 AM EDT as they were still set to end Friday with a weekly loss of more than 3 percent. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures were below $50, at $48.43, slipped 47 cents and 0.96% from their last close.

Matt Simpson, a senior market analyst, wrote in a Friday note, “Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations (for) extended cuts. As the extensions were estimated to be around nine to twelve months, OPEC needed to far exceed this time horizon for oil to sustain its rally.”

Moreover, the dollar index lost 0.12% to 97.08, some risk-off sentiment driving the yen higher, who rose to a 3-day high against the greenback 0.76% to 111.03 yen, while the euro also edged higher 0.13% to $1.1225.

Meanwhile, Sterling fell over half a percent to as low as $1.2870, a two-week low on Friday, pulling further away from a May 18 peak of $1.3048, its strongest level since September last year, after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition prior to elections next month.

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Stocks Rise in Asia as Oil Extends Gains

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Stocks in Asia rose higher, climbing to a fresh-two year high on Tuesday, while oil extended gains after major producers, Saudi Arabia and Russia agreed to an extension of supply cuts until 2018.

Stock benchmark indexes in Australia and Japan climbed, offsetting losses in China shares, after the S&P 500 Index closed above 2,400 for the first time. Crude rose for a fifth day, topping $49 a barrel as Saudi Arabia and Russia extending output cuts will probably influence other countries to follow. Shenzhen shares increased while those in Shanghai erased an earlier decline after the closing of a global summit in Beijing. The yen fortified with the Mexican peso and South Korean won.

The surge in oil is keeping the global stocks bullish even as concern rises over the strength of the global economy. Chinese industrial production and retail data came in weaker than expected Monday, after American retail sales and inflation also cast a shadow on growth. Financial markets have also gotten a boost from China’s sweeping plan to improve global infrastructure.

“At the moment we are taking inspiration from the higher oil price and what it means for energy prices across the world; what it means for (capital expenditure); and what it means for reflation — and of course the market loves reflation,” said Chris Weston, a chief market strategist in Australia.

Main Moves in Financial Markets

The MSCI Asia Pacific Index increased 0.2 percent as of 10:54am in Tokyo, heading for the highest closing level in 2 years. Japan’s Topix rose 0.3 per cent, while the Nikkei 225 Stock Average climbed to within two points of reaching 20,000 before pulling back. Australia’s S&P/ASX 200 climbed 0.2.

China shares traded in Hong Kong retreated 0.6 percent after surging 1.6 percent on Monday following optimism over Beijing’s infrastructure spending program. The Shanghai Composite Index slumped 0.7 per cent and the Hang Seng Index lost 0.3 percent.

Oil added 0.6 per cent to US$49.12 a barrel, after surging 2.1 per cent on Monday while Gold gained 0.3 percent to US$1,234.61 an ounce, rising for a fourth straight sessions.

The yen rose 0.2 percent to 113.52 per US dollar, after dropping 0.4 percent on Monday. The South Korean won increased 0.4 percent to the highest since April 4, while the Mexican peso added 0.3 percent.

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Oil Prices Decline on Bloated U.S. Crude Storage

On Wednesday, oil prices plunged as increasing crude stocks in the United States underscored a continuing global fuel supply overhang in spite of an OPEC-led effort to reduce production.

On Wednesday, oil prices plunged as increasing crude stocks in the United States underscored a continuing global fuel supply overhang in spite of an OPEC-led effort to reduce production.

Prices for front-month Brent crude futures, the international benchmark for oil, were at $50.79 per barrel at 0451 GMT, dropped 17 cents, or 0.3%, from their last close.

U.S. West Texas Intermediate (WTI) crude futures declined 18 cents, or 0.4%, at $48.08 a barrel, 01:31AM ET.

“Crude oil prices fell as concerns over rising U.S. inventories resurfaced,” ANZ bank said on Wednesday.

The inventories of U.S. crude oil increased by 4.5 million barrels in the week to March 17 to 533.6 million barrels, the American Petroleum Institute (API) said late on Tuesday.

“The American Petroleum Institutes’ crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

“The American Petroleum Institutes’ crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

“If the API stuck the knife in, tonight’s EIA Crude Inventory figures may twist it. A blowout above the 2.1 million barrel increase expected, may well torpedo oil below the waterline,” he added.

Official U.S. Energy Information Administration (EIA) oil storage data is scheduled on Wednesday.

The bloated storage comes as U.S. oil output has increased more than 8% since mid-2016 to over  9.1 million barrels per day (bpd), levels comparable to late 2014, when the oil market  started to fall.

Increasing output  in the United States and somewhere else, and bloated inventories, are undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to reduce output and prop up prices.

“OPEC’s market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience,” U.S. bank Jefferies said on Wednesday in a note to clients, even though it added that the reductions would possibly start to show by the second half of the year, if the Organization of the Petroleum Exporting Countries (OPEC) extends its output cuts beyond June.

In spite of reductions, analysts warned of renewed or ongoing glut in coming years, especially as U.S. shale producers ramp up and once the Organization of the Petroleum Exporting Countries (OPEC) returns to full capacity.

U.S. bank Goldman Sachs (NYSE:GS) advised its clients in a note this week that a U.S. shale led production surge “could create a material oversupply in 2018-19.”

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Oil Prices Prolong Gains after Decline in U.S. Stockpiles

On Thursday, crude oil prices increased in early Asian trading, lengthening gains from the prior session after official data indicated U.S. stockpiles had eased from record highs.

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On Thursday, crude oil prices increased in early Asian trading, lengthening gains from the prior session after official data indicated U.S. stockpiles had eased from record highs.

On Wednesday, the prices increased after a skid of market reports and official data offered some expectation that a near three-year global surplus in oil is coming to an end, albeit more slowly than many expected.

The market was also afloat after the Fed Reserve increased interest rates in line with expectations but did not indicate any pick-up in the pace of further increases.

U.S. West Texas Intermediate (WTI) crude increased  31 cents, or 0.6%, at $49.17 a barrel by 0202 GMT, having increased 2.4% in the prior session, its first surge in eight days.

Brent futures increased 35 cents, or 0.7%, to $52.16. They had their first surge in seven days on Wednesday, gaining 1.7%.

The benchmarks have bounced off their lowest levels since the Organization of the Petroleum Exporting Countries (OPEC) agreed at the end of the previous year to reduce crude output, with an initial price surge evaporating as stockpiles stayed high.

Global oil inventories increased for the first time in six months in January, in spite of the Organization of the Petroleum Exporting Countries (OPEC) deal, the International Energy Agency stated in its monthly oil report on Wednesday.

However,  data from the U.S. Energy Information Administration (EIA) indicated U.S. crude  stocks declined last week, the first weekly drop after nine straight surges.

Crude inventories dropped  237,000 barrels during the week to March 10. Analysts had forecast a surges of 3.7 million barrels.

The inventories have been carefully observed by oil traders to decide whether the OPEC agreement to cut production  is reducing the global surplus.

“Inventories are the barometer of global oil market rebalancing,” Bernstein Energy said in a note on Thursday.

“While the large (global) inventory build seems counter-intuitive given the cuts to OPEC supply, there are good reasons for this,” Bernstein said, citing seasonal declines in demand, time lags between cuts and deliveries and traders tapping floating storage.

Oil bulls were also encouraged after the IEA said demand should overtake supply in the first half of current  year.

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Oil Clings to Gains as Stockpiles Increases for Seventh Week

On Friday, oil prices held gains on data indicating U.S. stockpiles increase for a seventh straight week, however, at a pace that was well below expectations, and news of oil being sold out of storage in Southeast Asia.

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On Friday, oil prices held gains on data indicating U.S. stockpiles increase for a seventh straight week, however, at a pace that was well below expectations, and news  of oil being sold out of storage in Southeast Asia.

U.S. West Texas Intermediate (CLc1) was unmoved at $54.45 a barrel by 0526 GMT (12:26 a.m. ET), dragging back from early losses. West Texas Intermediate were on track for a weekly increase of approximately 2%, which would be its biggest so far this year.

Brent crude (LCOc1) increased  3 cents at $56.61 and was on track for a weekly increase of about 1.4 percent, 12:46AM ET.

U.S. crude inventories increased  by 564,000 barrels in the week to Feb. 17, up for a seventh week, even though below analysts’ expectations for a surge  of 3.5 million barrels, the Energy Information Administration (EIA) stated.

The Organization of the Petroleum Exporting Countries (OPEC) and producers, including Russia, have guaranteed to reduce output  by around 1.8 million barrels per day (bpd) to tackle a global surplus that has kept prices low since 2014.

Although OPEC seems to be sticking to its agreement, producers that were not part of the contract, mainly U.S. shale drillers, have increased production, driving the growth in inventories in the United States, the world’s biggest oil consumer.

“Current oil prices are neither sustainable for OPEC or the industry,” AB Bernstein said in a note on Friday. “As such, inventories will have to fall, which we expect will be clearer in the spring after the seasonal build.”

Indications are emerging that this is happening in Asia with traders selling oil held in tankers anchored off Malaysia, Singapore and Indonesia, according to the reports on Friday.

This month, more than 12 million barrels of oil have been taken out of storage in tankers berthed off Southeast Asian countries, shipping data in Thomson Reuters Eikon shows.

Traders have been profiting from a market feature identified as contango, where prices for later delivery are higher than those for immediate dispatch. However,  the future premium is declining and future prices may slip below spot prices, known as backwardation.

“Tightening fundamentals will push the crude market into backwardation in the coming months,” BMI Research said in a note. This “will benefit participants in the paper market but hamper the profits of oil traders who are unable to exploit the cash and carry arbitrage.”

On Additional News

On Friday, crude prices drifted weaker in Asia with U.S. rig count figures the next piece of the weekly supply and demand picture in the U.S. ahead.

On the New York Mercantile Exchange, delivery of crude futures for April eased 0.17% to $54.36 a barrel, while on London’s Intercontinental Exchange, Brent was last quoted at $56.49 a barrel.

On Friday, weekly figures from oilfield services provider Baker Hughes are due on U.S. rig activity. The previous  week, Baker Hughes stated the figure of active U.S. rigs drilling for oil increase by six , the 5th weekly surges in a row. That brought the total amount to 597, the most since November 2015.

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Oil Prices Down on Upbeat U.S. Inventories

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On Wednesday, oil prices declined to extend falls from the prior day, as a huge increase in U.S. fuel inventories and a decline in Chinese demand implied that global crude markets remain oversupplied in spite of The Organization of the Petroleum Exporting Countries  led efforts to reduce production.

International Brent crude futures  were trading at 54.70 per barrel at 0758 GMT, decline 35 cents, or 0.64%, from their previous close.

U.S. West Texas Intermediate (WTI) crude was at $51.68 a barrel, down 49 cents, or 0.94%, 03:07AM ET.

These drops came after over 1-percent declines the previous day.

The sharp drops came on the back of surprisingly big increases in U.S. fuel inventories, as reported by the American Petroleum Institute (API) on Tuesday.

“The API delivered a Goliath crude inventory number… The second highest on record. The reaction was predictable as the herd, already nervous from the previous day’s price action, turned en masse and ran off the cliff,” said Jeffrey Halley of futures brokerage OANDA in Singapore.

Crude inventories increase by 14.2 million barrels in the week to February 3 to 503.6 million barrels, compared with analysts’  forecast  for a 2.5 million barrel increase.

Gasoline stocks increased by 2.9 million barrels, compared with outlooks for a 1.1-million barrel increase.

Goldman Sachs stated that the data pointed to “U.S. gasoline demand falling sharply by 460,000 barrels per day (bpd) year-on-year in January, with such declines only previously (seen) during recessions.”

In spite of this, the U.S. bank said “this data vastly overstates a likely modest year-on-year decline in gasoline demand,” and that its “outlook for global strong demand growth (remains) unchanged”.

There were other indications of market weakness outside the United States.

China’s 2016 oil demand increase at the sluggish pace in at least three years, Reuters calculations based on official data presented.

China’s implied oil demand growth eased to 2.5% in 2016, declined from 3.1% in 2015 and 3.8% in 2014, led by a sharp decline in diesel consumption and as gasoline usage eased from double-digit progress.

The reducing happens as the economy expanded by only 6.7% in 2016, the slowest pace in 26 years.

Reducing demand and ongoing high inventories destabilize efforts by the Organization of the Petroleum Exporting Countries and other producers, including Russia to reduce production by nearly 1.8 million barrels per day (bpd) during the first half of this year in order to prop up prices and rebalance the market.

In spite of this, both Brent and West Texas Intermediate (WTI) are down over 6% since early January, when the reduction  started to be implemented.

OPEC and non-OPEC countries have made a strong beginning  to lowering their oil production under the first such deal in more than a decade as global producers look to lessen oversupply and support prices.

Somewhere else on Nymex, gasoline futures  for March increased 0.7 cents, or 0.5%, to $1.482 a gallon, while March heating oil fell 0.4 cents ,or 0.3%, to $1.617 a gallon.

Delivery of Natural gas futures for March eased down 2.4 cents or 0.8%, to $3.106 per million British thermal units.

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