Oil Prices

Oil hits $70 a barrel as Iran, Trump trade threats
* Brent tops $70/bbl; WTI at highest since April.
* Iraqi govt calls on foreign troops to leave.
* Trump threatens sanctions on Iraq if U.S. troops forced to leave.
* U.S. will also take action if Iran strikes back, Trump says.

Reuters
PUBLISHED MON, JAN 6 20205:49 AM EST
UPDATED 44 MIN AGO

Oil prices rose a further 2% on Monday, pushing Brent above $70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East after a U.S. air strike which killed a top Iranian military commander.

Brent crude futures soared to a high of $70.74 a barrel and was at $69.74 at 0940 GMT, up $1.14, or 1.66%, from Friday’s settlement.

U.S. West Texas Intermediate crude was at $63.92 a barrel, up 87 cents, or 1.38%, after touching $64.72, the highest since April.

The gains extended Friday’s more than 3% surge after a U.S. air strike in Iraq killed Iranian military commander Qassem Soleimani on Friday, heightening concerns about an escalation in conflict in the Middle East and the possible impact on oil supplies.

The region accounts for nearly half of the world’s oil production, while a fifth of the world’s oil shipments pass through the Strait of Hormuz.

On Sunday U.S. President Donald Trump threatened to impose sanctions on Iraq, the second largest producer among the Organization of the Petroleum Exporting Countries (OPEC), if U.S. troops were forced to withdraw from the country.

Baghdad earlier called on U.S. and other foreign troops to leave Iraq.

Trump also said that the United States would retaliate against Iran if Tehran were to strike back after the killing.

“The situation brings lots of uncertainty and geopolitical tea-leaf reading on reactions. While the closure of the Strait of Hormuz remains a very unlikely event, the deterioration in Iraq bears supply risks,” said Norbert Rucker, head of economics at Swiss bank Julius Baer.

“Geopolitics tend to be a temporary force on oil markets and we believe this time is no different. We raise our near-term forecast to $65 per barrel, and maintain a neutral view”.

Goldman Sachs analysts said the current risk premium embedded in Brent monthly price spreads is already elevated and an actual supply disruption is now necessary to sustain current oil prices.

“The precedent set by the Abqaiq attack (on Saudi oil facilities in September 2019) showed that the oil market has significant supply flexibility starting when Brent is at $70 a barrel, even before shale production needs to ramp up, suggesting only moderate upside from here, should an attack on oil assets actually occur,” the bank said.

More details in https://www.cnbc.com/2020/01/06/oil-mark...focus.html

Oil rises from 13-month low as new virus cases slow

Alex Lawler
FEBRUARY 11, 2020 / 9:28 AM

LONDON (Reuters) - Oil rose to $54 a barrel on Tuesday, recovering from a 13-month low as the number of new coronavirus cases slowed in China, easing some concerns about a lasting hit to oil demand.

The death toll climbed above 1,000 on Tuesday, while the number of new confirmed cases fell. The epidemic may peak in February and then plateau before easing, the Chinese government’s top medical adviser on the outbreak said.

Brent crude LCOc1 rose 82 cents to $54.09 a barrel by 1008 GMT. It fell to $53.11 on Monday, the lowest since January 2019. U.S. West Texas Intermediate CLc1 crude was up 72 cents at $50.29.

Investors remain wary that China’s oil demand could take a further hit if the coronavirus cannot be contained and if OPEC and its allies, known as OPEC+, fail to agree on further steps to support prices.

“Though oil is recovering again today, the lack of any coordinated action by OPEC+ means that oversupply concerns are likely to retain the upper hand,” said Eugen Weinberg, analyst at Commerzbank.

The virus is already denting demand in the world’s second-largest oil consumer. Chinese state refiners plan to cut as much as 940,000 barrels per day (bpd) - almost 1% of world demand - from their crude processing rates in February.

Oil rose alongside a rally in world equities, which resumed their rise towards record highs on Tuesday on hopes the virus is peaking. But some analysts said concerns about the virus and oil demand would likely resurface.

The rally “seems to be more of a technical retracement than a general belief that the epidemic has run its course,” Tamas Varga of oil broker PVM said.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia are restraining output by 1.7 million bpd in 2020 to support the market, and have been weighing a further curb to stem fallout from the virus.

An OPEC+ advisory panel proposed an additional cut of 600,000 bpd last week, but Russia has delayed delivering its official stance, frustrating some OPEC members.

More details in https://www.reuters.com/article/us-globa...SKBN20506H

Oil suffers rout after Saudi Arabia fires first shot of price war

Aaron Sheldrick
MARCH 9, 2020 / 5:20 AM

TOKYO (Reuters) - Losing more than a quarter of their value, oil prices were set on Monday for their biggest daily rout since the first Gulf War, after Saudi Arabia cut its official prices in a market already reeling from the impact of the coronavirus on global demand.

Saudi Arabia slashed its official selling prices and made plans to ramp up crude output next month after Russia balked at making a further steep output cut proposed by the Organization of Petroleum Exporting Countries to stabilize oil markets.

Brent LCOc1 crude futures were down $11.38, or 25%, at $33.89 a barrel by 0732 GMT, after earlier dropping to $31.02, their lowest since Feb. 12, 2016. Brent futures were on track for their biggest daily decline since Jan. 17, 1991, when prices dropped at the start of the first Gulf War.

U.S. West Texas Intermediate (WTI) crude CLc1 fell by $11.12, or 27%, to $30.16 a barrel, after touching $27.34, also the lowest since Feb. 12, 2016. The U.S. benchmark was potentially heading for its biggest decline on record, surpassing a 33% fall in January 1991.

“The timing of this lower price environment should be limited to a few months unless this whole virus impact on global market and consumer confidence triggers the next recession,” said Keith Barnett, senior vice president strategic analysis at ARM Energy in Houston.

The disintegration of the grouping called OPEC+ - made up of OPEC plus other producers including Russia - ends more than three years of cooperation to support the market.

Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March, two sources told Reuters on Sunday.

The world’s biggest oil exporter is attempting to punish Russia, the world’s second-largest producer, for not supporting the production cuts proposed last week by OPEC.

Saudi Arabia, Russia and other major producers last battled for market share like this between 2014 and 2016 to try to squeeze out production from the United States, which has grown to become the world’s biggest oil producer as flows from shale oil fields doubled over the last decade.

“The deal was always destined to fail,” said Matt Stanley, senior broker at Starfuels in Dubai.

“All that happened was, and all that has consistently happened since the inception of the cuts, has been that U.S. shale producers have gained market share.”

Saudi Arabia over the weekend cut its official selling prices for April for all crude grades to all destinations by between $6 and $8 a barrel.

“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus,” Goldman Sachs said.

More details in https://www.reuters.com/article/us-globa...SKBN20V131

Now that sub $30 levels is the norm, we might start seeing $15 levels pretty soon which would put it near late 1990s AFC crash time lows...

If Oil remains at the $30-$40 range, the US Shale is in trouble. Many of the companies are debt ridden and they are already struggling to repay debts in an extremely monetary accommodative environment. I wont be surprised if Chesapeake Energy (CHK) and Diamond back will run into financial difficulties. CHK is my tip for going bankrupt in 2021.

The downstream companies such as FTS international and Halliburton will face a fall in revenue for their fracking equipment and mainly because they serve the US Shale Oil.

Shale Oil needs $50 WTI Brent to survive, at this rates it is probably only the Permian Basin which is able to survive.

(09-03-2020, 10:26 PM)CY09 Wrote: If Oil remains at the $30-$40 range, the US Shale is in trouble. Many of the companies are debt ridden and they are already struggling to repay debts in an extremely monetary accommodative environment. I wont be surprised if Chesapeake Energy (CHK) and Diamond back will run into financial difficulties. CHK is my tip for going bankrupt in 2021.

The downstream companies such as FTS international and Halliburton will face a fall in revenue for their fracking equipment and mainly because they serve the US Shale Oil.

Shale Oil needs $50 WTI Brent to survive, at this rates it is probably only the Permian Basin which is able to survive.

If oil stays @:

1, <80, Saudi is in trouble as their budget gets screwed
2. <50, Russia is in trouble as their budget gets screwed
3. <40, US Shale is in trouble from bankruptcy.

(take above numbers +/-10!)

At $30, everyone loses, hence ensuring everyone will act in their self interests i.e. a cure for $30 brent is $30 brent.

Given the seizure in US repo+HY credit, Trump (if he is smart enough) will need to act to prevent financial contagion from US Shale defaults spreading into credit and then FX+equities, so something will happen, i think. At the very least Kushner will try to get a >40 oil.

2014 oil crisis lasted 2yrs, so Saudi+Russia can take a lot of pain for a long time.

Trump can put up tariffs on oil, as the Saudis will be paying for the taxes, similarly to his previous statement that China is paying for the US-China import tariffs. Hahaha.

Old 2016 interview with Warren Buffett explaining low oil price, with US being the top oil producer now.


https://www.youtube.com/watch?v=s4CfuBfKtOg

Russia claims it refused to cut supply because it is waiting to see what the full impact of the outbreak will be on oil demand, but experts say Moscow may also be hoping to cut the knees out from under US domestic shale oil production after Washington sanctioned Russian energy companies.
Amy Myers Jaffe, an oil and Middle East expert at American think tank the Council on Foreign Relations, told The New York Times, “If you’re Russia, it’s worth it for you to take a three month price hit to see if you can knock out US oil exports.”

Explainer | Why did Saudi Arabia start an oil price war?
https://www.scmp.com/week-asia/explained...-price-war

Oil falls more than 5% after Trump surprises with travel ban

Bozorgmehr Sharafedin
MARCH 12, 2020 / 8:41 AM

LONDON (Reuters) - Oil prices fell more than 5% on Thursday after U.S. President Donald Trump unexpectedly announced restrictions on travel from Europe, in an attempt to halt the spread of coronavirus after the World Health Organization described the outbreak as a pandemic.

The slump in oil is being compounded by the threat of a flood of cheap supply after Saudi Arabia and the United Arab Emirates said they would raise output in a standoff with Russia.

Brent crude LCOc1 was down $1.98, or 5.5%, at $33.81 by around 1215 GMT. U.S. crude CLc1 was down $1.90, or 5.8%, at $30.08.

Global shares also took a hit after President Trump said the United States would suspend all travel from Europe, except Britain and Ireland, as he unveiled measures to contain the coronavirus.

The oil market was taking the decision very negatively due to the impact on jet fuel demand and expectations for business activity and economic growth, said Bjoernar Tonhaugen, head of oil markets at energy consultant Rystad.

“It leads to further loss of confidence in governments’ handling of the fallout and increases uncertainty about the extent of the virus impact on the overall economy, reflected in sharp falls in risk assets across the board this morning.”



The two benchmarks are down about 50% from highs reached in January. They had their biggest one-day declines since the 1991 Gulf War on Monday after Saudi Arabia launched a price war.

The six-month Brent contango spread LCOc1-LCOc7 from May to November widened to as low as $6.40 a barrel, a level not seen since February 2015.

Contango is where the futures price of a commodity is higher than the spot price, prompting traders to fill tankers with oil to store for later delivery.

The cost to transport oil on supertankers soared as major producers scrambled to secure vessels to ship more crude in a bid to regain market share and buyers took advantage of plunging oil prices.



As many await to see who will break first in the Saudi-Russian price war, Ehsan Khoman, head of MENA research and strategy at MUFG, said: “We believe that both sides have enough financial capacity and sufficiently divergent goals to sustain the oil price war for many quarters, not months.”

The U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) have slashed forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.

“If the crisis persists for another two or three months, many companies will go bankrupt, especially those in the U.S. energy sector which also have to deal with an oil price war,” said Hussein Sayed, chief market strategist at FXTM.

More details in https://www.reuters.com/article/us-globa...SKBN20Z06D