OIL PRICES MINIMUM
WSJ - U.S. oil prices suffered another day of big losses, entering a bear market and setting new lows dating back to August as oversupply concerns continue to roil the market.
Money managers are, yet again, pulling out from what had been a big bet that global exporters could ease oversupply through a historic agreement to cut output, analysts and a broker said. These types of big selloffs have become common in the oil markets since March. The market is now on pace for its eighth loss of more than 2% in just the past two months.
Rising production from the U.S. and Libya, and stubbornly high stockpiles are undermining predictions that cuts from other producers would send prices higher. Money managers had placed a record high number of bets that oil prices would rise even after they went beyond $50, but that has led to a strong momentum for prices to keep falling as those traders backtrack, analysts and a broker said.
"Bearish sentiment is pervasive in oil markets as bulls have been burned on several occasions this year and this has triggered an unwind," analysts at Citigroup Inc. said in a note.
U.S. crude for July delivery lost 97 cents, or 2.2%, to $43.23 a barrel on the New York Mercantile Exchange, trading at prices it hasn't settled below since Aug. 10. A settlement at $43.56 a barrel or lower put oil into a bear market, which means it has lost 20% or more since the recent high, a nearly one-year high on Feb. 23.
Many traders have been watching U.S. inventory levels, and that may be playing a role again Tuesday. With all the momentum pushing the market lower, even traders who believe output cuts are putting the market closer to a supply shortage aren't willing to place bets on that until after the U.S. government's influential weekly report on storage levels, due Wednesday morning, said Scott Shelton, broker at ICAP PLC.
"Most of the bulls are waiting on statistics, and they're not going to stand in front of this thing until then," he said.
Analysts and traders surveyed by The Wall Street Journal expect crude stockpiles to fall by 2 million barrels, on average, in the week ended June 16. The U.S. Energy Information Administration report is scheduled for release at 10:30 a.m. ET on Wednesday.
The Organization of the Petroleum Exporting Countries and big-producer allies did agree last month to extend an agreement through March that effectively holds back almost 2% of the global crude supply. But that didn't satisfy traders who think that may not be enough to end an oversupply that dates back to 2014, and prices have fallen 17% since OPEC announced the extension in late May.
The 14-nation cartel's aim is to draw down a glut of oil and raise prices, but oil in storage has remained at stubbornly high levels. OPEC's efforts are being undermined by its own members, some of whom have exemptions, and rising production in other countries, notably from shale-drillers in the U.S.
Inventories aren't on pace to fall into OPEC's target area any time in the next 18 months, Morgan Stanley analysts said in a note released Tuesday morning. Rising demand from drivers in the summer is likely to keep stockpiles falling through the end of this year, but it is enough to cut only a little more than half of a surplus currently in storage, compared with five-year-average levels, the bank said.
Its estimates show surging U.S. production and the eventual rebound of OPEC and Russian production will cause inventory levels to rise again starting in 2018. OPEC would need to extend its cuts through the end of 2018 or make deeper cuts to get inventories back down to historical averages, said the Morgan Stanley team, led by Martijn Rats.
"Recent data points are not encouraging," he said.
Libya, an OPEC member that was exempt from the supply cut, is ramping up its oil production and has almost achieved its short-term production goal of 900,000 barrels a day, said analysts for Commerzbank.
U.S. oil drillers continue to ramp up their production. The latest data from the oil-services firm Baker Hughes showed the rig count climbed by 6 to a 26-month peak of 747.
Identifiable oil inventories -- both oil and products in the Organization for Economic Cooperation and Development, China and selected other non-OECD countries -- increased at a rate of around 1 million barrels a day in the first three months of 2017, according to Morgan Stanley.
Later on Tuesday, investors are looking forward to data from the American Petroleum Institute, which puts out estimates of crude supply and stocks.
Analysts surveyed by S&P Global Platts estimate U.S. oil inventories fell 2 million barrels last week, with gasoline supplies dropping 750,000. Stated inventories in the prior two weeks' government reports have been higher than analysts anticipated.
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AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.