Tag Archives: oil market

Oil rises on expectation that Iranian supply won’t return soon

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices edged higher on Tuesday after the top U.S. diplomat said that even if the United States were to reach a nuclear deal with Iran, hundreds of U.S. sanctions on Tehran would remain in place.

That could mean additional Iranian oil supply would not be re-introduced into the market soon.

“I would anticipate that even in the event of a return to compliance with the JCPOA (Joint Comprehensive Plan of Action), hundreds of sanctions will remain in place, including sanctions imposed by the Trump administration,” U.S. Secretary of State Antony Blinken.

Brent crude rose 39 cents to $71.88 a barrel, a 0.6% gain. U.S. West Texas Intermediate oil rose 51 cents to $69.74 a barrel.

“Blinken is looking at the reality of the situation and saying even if we do get a deal, there’s a long way to go,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “All those people expecting a flood of oil are going to be disappointed.”

Barriers to the revival of Iran’s nuclear deal remain ahead of talks due to resume this week between Tehran and world powers, four diplomats, two Iranian officials and two analysts said.

In China, data showing China’s crude imports were down 14.6% in May on a yearly basis weighed on futures.

Crude prices have risen in recent weeks, with Brent up by nearly 40% this year and WTI gaining even more, amid expectations of demand returning as some countries succeed in vaccinating populations against COVID-19.

Restraint on supply by the Organization of the Petroleum Exporting Countries and allies has also helped buttress prices.

Meanwhile, U.S. crude inventories have been drawing down and were forecast to drop for a third straight week, analysts said in a poll ahead of industry data from the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT), followed by the government’s report on Wednesday.

“The fundamental environment on the oil market remains favorable: fuel demand is recovering strongly not only in the United States, but also in Europe following the (partial) lifting of restrictions,” Commerzbank said.

There are still questions about the demand recovery’s trajectory.

In Britain, one of the most vaccinated countries in the world, there are now doubts that the country will lift all coronavirus-related restrictions as previously planned on June 21.

(Reporting by Stephanie Kelly in New York; additional reporting by Ahmad Ghaddar and Aaron Sheldrick; Editing by Marguerita Choy and Jason Neely)

Saudi Arabia floods markets with $25 oil as Russia fight escalates

By Olga Yagova

MOSCOW (Reuters) – Saudi Arabia is flooding markets with oil at prices as low as $25 per barrel, specifically targeting big refiners of Russian oil in Europe and Asia, in an escalation of its fight with Moscow for market share, five trading sources said on Friday.

The sources, from oil majors and refiners which process crude in Europe, said Saudi state oil company Aramco told them it would supply all requested additional volumes in April.

Sources previously told Reuters Saudi Arabia is also seeking to replace Russian oil with Chinese and Indian buyers, although not all refiners received volumes they had asked for.

Tanker rates soared as Saudi Arabia provisionally chartered around 31 supertankers to take extra oil, including to the United States, where Russian oil is usually less in demand.

Oil prices have halved since the start of the year because demand has been hit by the coronavirus outbreak and after Russia and OPEC failed to reach a new deal on supply cuts.

Moscow refused to support new deeper cuts, saying the impact from the virus could be much worse than thought, and Riyadh retaliated by opening its taps and pledging to pump record volumes on to the market.

Russia has so far said it is not planning to come back to the negotiating table despite feeling the pressure from the extraordinary Saudi moves.

Energy Minister Alexander Novak said on Friday Russia saw no grounds so far for returning to discussions with its OPEC+ partners and can increase its oil production by a modest 200,000 barrels per day in April.

By contrast, Saudi Arabia has pledged to raise output by 2.6 million bpd in April, including from stocks. Fellow Gulf producers like the United Arab Emirates has had to join in the battle for market share and has also announced production increases.

Saudi Arabia has made a deep cut to its official selling prices for oil. Arab Light and Arab Medium barrels were offered at selling price of $25-28 per barrel on CIF Rotterdam basis, traders said.

On Friday, Abu Dhabi National Oil Company (ADNOC) also offered steep discounts for its Murban crude for April, announcing forward prices for the first time in its history. It previously set prices retroactively.

Russia’s main blend Urals has been offered slightly higher than $30 per barrel on CIF Rotterdam basis, according to Refinitiv Eikon data.

“We are happy with our allocation. The requests for April were confirmed. I look forward to May if prices remain that attractive”, a trader with a European oil company involved in the talks told Reuters.

European oil refiners including Total, BP, Eni and SOCAR have all had allocations for additional Saudi crude oil supplies in April confirmed, the sources said.

Saudi Aramco declined to comment. Total, BP, Eni and SOCAR did not immediately respond to Reuters requests for comment.

On Thursday, sources told Reuters Saudi Arabia started focusing on boosting supplies to traditional buyers of Urals as it is trying to replace Russian oil in refiners’ feedstock around the world, from Europe to India.

Brent crude prices were on track for their biggest weekly fall since the 2008 financial crisis on Friday as investors fretted over the impact of the virus on demand and the Russian-Saudi price war. [O/R]

(Reporting by Olga Yagova; Additional reporting by Jonathan Saul, Rania El Gamal in Dubai and Devika Krishna Kumar in New York; Editing by Dmitry Zhdannikov/Jan Harvey/David Evans/Jane Merriman)

Trump’s revenge: U.S. oil floods Europe, hurting OPEC and Russia

FILE PHOTO: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford/File Photo

By Olga Yagova and Libby George

MOSCOW/LONDON (Reuters) – As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits – and flooding Europe with a record amount of crude.

Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices <LCOc1> close to four-year highs.

Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.

“U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.”

U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia.

In April, U.S. supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.

In January-April, U.S. supplies jumped four-fold year-on-year to 6.8 million tonnes, or 68 large Aframax tankers, according to the same data.

Trade sources said U.S. flows to Europe would keep rising, with U.S. barrels increasingly finding homes in foreign refineries, often at the expense of oil from OPEC or Russia.

In 2017, Europe took roughly 7 percent of U.S. crude exports, Reuters data showed, but the proportion has already risen to roughly 12 percent this year.

Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.

Polish refiners PKN Orlen and Grupa Lotos and Norway’s Statoil are sampling U.S. grades, while other new buyers are likely, David Wech of Vienna-based JBC Energy consultancy said.

“There are a number of customers who still may test U.S. crude oil,” Wech said.

The gains for U.S. suppliers could come as a welcome development for U.S. President Donald Trump, who accused OPEC on Friday of “artificially” boosting oil prices.

“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!” Trump wrote on Twitter.

‘KEY SUPPLY SOURCE’

While the United States lifted its oil export ban in late 2015, the move took time to gain traction among Europe’s traditional refineries, which were slow to diversify away from crude from the North Sea, West Africa and the Caspian.

“European refiners started experimenting with U.S. crude last year,” said Ehsan Ul-Haq, director of London-based consultancy Resource Economics. “Now, they know more than enough to process this crude.”

U.S. oil gained in popularity, sources said, in part because of the wide gap between West Texas Intermediate, the U.S. benchmark, and dated Brent, which is more expensive and sets the price for most of the world’s crude grades.

This gap, known as the Brent/WTI spread, has averaged $4.46 per barrel this year, nearly twice as high as the year-earlier figure, Reuters data showed.

Wech of JBC Energy said the spread would likely persist in the near future.

The most popular U.S. grades in Europe are WTI, Light Louisiana Sweet, Eagle Ford, Bakken and Mars.

Prices for alternative local grades have been slashed as a result.

CPC Blend differentials recently hit a six-year low versus dated Brent at minus $2 a barrel. Russia’s Urals also came under pressure despite the end of seasonal refinery maintenance. BFO-CPC BFO-URL-BFO-URL-NWE

WTI was available at 80-90 cent premiums delivered to Italy’s Augusta, well below offers of Azeri BTC at a premium of $1.60 a barrel, according to trading sources.

U.S. oil is even edging out North Sea Forties, which is produced in the backyard of the continent’s refineries.

Cargoes of WTI were offered in Rotterdam at premiums of around 50-60 cents a barrel above dated Brent, cheaper than Forties’ premium of 75 cents to dated.

(Additional reporting by Julia Payne and Devika Krishna Kumar; Editing by Dale Hudson)