Weekly Review

Brent crude futures jumped nearly $3 a barrel on Friday after a US airstrike killed top Iranian and Iraqi military commanders in Baghdad. Brent crude futures hit an intraday high of $69.16 a barrel, their highest since Sept 17th, before easing down to $68.60, up $2.35 for the day. West Texas Intermediate futures were up $1.85 or 3.04 percent to $63.05 a barrel, having earlier spiked to $63.84 a barrel, their highest since May 1.

Oil prices rose for the fourth consecutive weekly gain last week, steadying at three-month highs. At the close Friday, Brent was at $68.15 and WTI at 62.72 after the EIA reported an inventory draw of 5.5 million barrels for the week ending December 20 in the last weekly petroleum status report for 2019. Gasoline inventories were up by 2 million barrels in the week to December 20, compared with a build of 2.5 million barrels for the previous week. Distillate fuel inventories declined by 200,000 barrels. Oil prices are now 30 percent higher than they were at the start of the year, and investors are more bullish than they have been in months.

Oil futures finished lower Friday, with declines accelerating after the weekly report on drilling rigs showed a significant increase. However, prices still climbed for a third straight week after easing US-China trade tensions lifted business confidence and the outlook for global economic growth. West Texas Intermediate settled Friday at $60.44, while Brent ended the week at $66.14.

Oil rose on Friday to its highest in nearly three months as progress in resolving the US-China trade dispute was announced, and a decisive Tory win in Britain’s general election appeared to settle two uncertainties that have plagued the markets for months. At the close, NY oil was just over $60 and London was $65.22. There are two major unknowns that will determine where the oil prices go next year. The first is how well OPEC and its associates adhere to the agreement to make additional production cuts, and the second is how much US shale oil production will increase in 2020.

Oil prices rose on Friday, closing at $59.08 in N.Y. and $64.31 in London, up about 7 percent for the week. The surge came as a meeting of OPEC and its allies agreed to deepen output cuts by 500,000 b/d in early 2020. The additional reductions will last throughout the first quarter, and the group will meet again in early March for an extraordinary meeting to determine if the cut will be extended. OPEC will shoulder around two-thirds of the additional cuts.

US crude futures fell 5.1 percent to $55.17 a barrel in New York last Friday, paring most of their November rebound and logging their biggest drop since mid-September. Prices are 17 percent below their April peaks. Brent dropped 2.3 percent to $63.43 a barrel on Friday after edging lower on Thursday when US markets were closed for Thanksgiving.

Crude futures climbed by over $3 a barrel in the first four days of last week but settled lower Friday as unease over the status of US-China trade talks increased at the end of a week that saw prices reach their highest level since September. The higher prices came on signs of a tighter physical market and more rumors that OPEC+ would extend the production cuts. But the market is still awaiting direction from the U.S.-China trade war – every utterance in either direction regarding tariffs has an immediate price impact. ICE Brent January futures settled 58 cents lower day on day Friday at $63.39, while the NYMEX January light sweet crude futures contract settled down 81 cents at $57.77.

US futures fluctuated between $56 and $57.50 last week as stockpiles rose, the rig count dropped, and hopes for a breakthrough in the US-China trade negotiations kept coming and going. Brent rose above $63 a barrel on Thursday after China hinted at progress towards a trade deal with the United States. The 16-month trade war between the world’s two biggest economies has slowed economic growth around the globe and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

On Wednesday, the price of oil came under pressure after the EIA reported a crude oil inventory build of 5.7 million barrels for the week to October 25. Analysts had expected a much smaller build of 729,000 barrels after a 1.7-million-barrel draw interrupted a string of five weekly inventory builds.

Prices were up about $2 last week on an unexpected drawdown in US crude stocks and rumors that OPEC+ is considering another production cut. Forecasters see a supply glut continuing in 2020 due to slowing economies and growth in US shale oil production. Beyond that, prices could increase considerably as supply growth slows to a trickle. Goldman Sachs says that slowing US shale production growth combined with a shortage of investment in long-term projects will lead to a new boom.

Oil prices slipped last week with Brent down 1.8 percent to close at $59.42. WTI closed $53.82, down 1.7 percent. Concerns increased about China’s economy, which slowed to 6 percent year-over-year growth in the third quarter, the slowest growth in 27-1/2 years. Many outside observers of China’s economy have noted for years that GDP numbers are likely inflated due to the nature of China’s economic reporting systems. Crude inventories continue to grow with US crude inventories up by 9.3 million barrels in last week’s stockpiles report.

Oil prices rose 2 percent on Friday after the US and China seemed to hammer out a trade deal that postponed tariffs. However, after studying the details – or lack thereof – investors lost much of their enthusiasm. Crude prices were down about 2 percent on Monday on worries that global crude demand could stay under pressure. The few details about the first phase of a U.S.-China trade deal did little to assure a quick resolution to the tariff fight.

Oil prices have hovered in the mid to low $50s since late July. They spiked briefly into the low $60s after the Saudi oil facilities were attacked but quickly settled back on news that the Saudis would be able to repair the damage quickly. Conventional wisdom says that the Russian-Saudi production freeze is keeping prices from going lower. At the same time falling demand is holding a lid on prices despite slowing production and lower exports in several countries. Geopolitical risk has receded as the top concern of oil traders. To quote one trader, “everything is about weak demand now.”

Peak-Oil.org is on hiatus indefinitely; our erstwhile editor, Tom Whipple, has been ill but is on the mend. His daily presence is sorely missed and we are hoping for a full and speedy recovery. We ask that you respect his privacy and not contact him until further notice. We will issue an update as soon as we have more information to share.

The US oil and gas rig count fell by eight this week, according to Baker Hughes, adding to months of losses, as US oil production falls to its lowest level since October 2018. The total number of active oil rigs in the United States fell by three, according to the report, reaching 776. The number of active gas rigs decreased by 5 to reach 169.

After six days of steady price drops that took prices down about $5 a barrel, oil rebounded about 1 percent on Friday. The rebound came on news that Iran had seized a British registered tanker while sailing in Omani waters through the Straits of Hormuz. Oil closed out the week at $55.63 in New York and $62.47 in London.

The storm in the Gulf of Mexico and geopolitical tensions in the Middle East pushed New York oil futures above $60 a barrel last week, with NY closing at $60.31 and Brent at $66.86. Nearly 70 percent or 1.3 million b/d of the Gulf’s oil production was shut in as oil producers evacuated 283 platforms in the northern Gulf. Natural gas production from the Gulf was cut by 56 percent. The slow-moving storm is producing unprecedented flooding, and it may be the middle of the week before the extent of the damage to onshore oil and petrochemical facilities is known.

Concerns about the weakening global economy and oil demand growth trumped Middle Eastern tensions and the OPEC+ rollover of the production cuts into 2020, sending oil prices lower for most of last week. Prices rebounded on Friday by a dollar or so with London futures closing out the week at $64.27, down about $2.50 from the week’s high on Tuesday, and New York closing at $57.61. Now that the OPEC+ efforts to force up oil prices are out of the way for another nine months, attention is focusing on US shale oil production, the slowing global economy, the US-China trade dispute, and the increasingly serious effects of climate change.

After a week of rampant speculation about what could happen at the G20 summit that would affect oil prices, the announcement on Saturday that the US and China have agreed to keep the current tariffs in place for now and would resume trade negotiations left the situation about where it has been for months. President Putin announced that Russia and its friends would join Saudi Arabia in extending the OPEC production cut for another six to nine months eliminating the drama from the formal OPEC+ meeting that will take place early this week. Oil prices were up a bit for the week settling at $64.74 in London and $58.47 in New York.

Until last Thursday, the oil markets largely ignored the increasing tensions between the US and Iran, including the attacks on six oil tankers near the Strait of Hormuz. Then Iran downed an unmanned US surveillance drone, and oil prices soared on the possibility that a war which could potentially halt the 18 million b/d of oil exports was imminent. After a day of vacillation, Washington backed off a retaliatory attack on Iran, allowing the situation to cool. By week’s end US crude was up 10 percent closing at $57.43 in New York and $65.20, or about 5 percent, in London.

Brent futures dropped steadily for the first three days last week, falling to a low below $60 on Wednesday before the attack on two oil tankers just south of the Straits of Hormuz. Prices then rebounded to close the week at $62.01. New York futures performed similarly, closing out the week at $52.51. Many observers commented on the relatively mild market reaction to the tanker attacks. Considering that a third of the world’s seaborne exports (some 18 million b/d) pass through the straits, many expected to see prices move much higher. The US and the Saudis already are saying that Iran was responsible for the attacks, while Tehran denies any involvement.

US oil prices sank into bear market territory on Wednesday, falling more than 20 percent below the April peak. Traders were concerned that a 6.8-million-barrel build in US crude stocks indicated lower prices ahead. The markets rebounded on Thursday and Friday on news that a settlement in the Mexican border dispute was in the offing and that the OPEC+ production cut was likely to be extended for six months. London futures closed at $63.29 and New York at $53.99. London, however, is trading about $10 below where it was in the middle of May. As has been the case for months, the markets are caught between sagging economic growth, which would hurt demand, and production outages in Venezuela, Iran, and potentially in Libya.

Oil prices fell on Friday posting their biggest monthly drop in six months, after President Donald Trump threatened tariffs on imports from Mexico. Unless the Mexican government stops people from illegally crossing into the US, he would impose a 5 percent tariff on imports starting on June 10th that would increase monthly, up to 25 percent on Oct. 1. Following the threat Brent crude futures fell $2.38, or 3.6 percent, to settle at $64.49 a barrel and New York futures fell $3.09 to $53.50 a barrel, a 5.5 percent loss. Brent touched a session low of $64.37 a barrel, lowest since March 8. WTI hit $53.41 a barrel, weakest since Feb. 14. During May Brent futures posted an 11 percent slide and WTI 1 percent, their largest monthly losses since November.

Oil prices plunged on Friday with New York futures falling about $5 a barrel. Precipitating the fall were concerns that there is no end in sight to the US-China trade war and that the global economy could slow by enough to affect oil demand. Prices rebounded about 1 percent on Friday but closed out the week at $58.62 in New York and $68.20 in London for their biggest weekly drop of the year. US crude oil inventories rose by 4.7 million barrels the week before last, hitting their highest levels since July 2017, mainly due to abnormally low refinery runs (89.9 percent of capacity) for this time of the year.