Oil prices steady after rising to highest since November, Brent above $90 per barrel
Oil prices were stable on Wednesday after rising to their highest levels since November last year on information about Saudi Arabia’s plans to extend voluntary production cuts until the end of 2023.
The cost of October futures for Brent on the London ICE Futures exchange at 8:10 a.m. on Wednesday is $90.03 per barrel, which is $0.01 (0.01%) lower than the price at the close of the previous session. On Tuesday, these contracts rose by $1.04 (1.2%) to $90.04 per barrel, the highest since November 16.
The price of October futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) fell by $0.03 (0.03%) to $86.66 per barrel. As a result of the previous trading, the value of these contracts increased by $1.14 (1.3%) to $86.69 per barrel, the highest value since November 15.
Saudi Arabia will continue to voluntarily reduce oil production by 1 million bpd until the end of 2023, the kingdom’s state agency reported on Tuesday, citing an official source in the Ministry of Energy.
“Further supply constraints will support oil prices,” analysts at ANZ Group Holdings Ltd. said in a research note. “We are likely to see a significant reduction in oil inventories as a result of these restrictions.
The price of Brent crude oil jumped above $90 per barrel in trading on Tuesday after information emerged about Saudi Arabia’s plans to extend its voluntary production cuts until the end of 2023.
The cost of November futures for Brent on the London ICE Futures exchange at 16:35 on Tuesday is $90.5 per barrel, which is $1.5 (1.69%) higher than the price at the close of the previous session.
The price of October futures for WTI in electronic trading on the New York Mercantile Exchange (NYMEX) has risen by this time by $1.81 (2.12%) to $87.36 per barrel.
Saudi Arabia will continue to voluntarily reduce oil production to 1 million bpd by the end of 2023, the kingdom’s state agency said, citing an official source in the Ministry of Energy.
Before this information was released, Brent was trading at around $88.4 per barrel, WTI at around $85.3 per barrel.
The actual level of oil production in Saudi Arabia is expected to reach 9 million bpd by the end of this year, the report emphasizes. “The voluntary decision to reduce oil production will be reviewed monthly with the possibility of reducing or increasing production,” the statement said.
This reduction is in addition to the 500 thousand bpd production cut announced in April, which will last until the end of 2024.
According to the source of the kingdom’s state agency, these steps are aimed at strengthening the precautionary measures taken by OPEC+ to maintain stability and balance in the oil markets.
Benchmark oil prices are moving mixed near multi-month highs on Tuesday morning.
The price of November Brent futures on London’s ICE Futures exchange is at $88.87 a barrel by 8:29 a.m. Q2, down 13 cents (0.15%) from the previous session’s close. On Monday, these contracts rose by $0.45 (0.5%) to $89 per barrel.
Quotes of futures for WTI crude oil for October at the electronic trading of the New York Mercantile Exchange (NYMEX) by the specified time rose by 32 cents (0.37%) and amounted to $ 85.87 per barrel. On Monday, the main trades were not held due to a day off in the U.S. (Labor Day).
Prices are supported by expectations of the extension of production reduction measures by OPEC+ countries.
Saudi Arabia is also expected to extend the voluntary production cut by 1 million barrels per day for October.
At the same time, traders regard the signs of possible cooling of the American economy as a reason for the end of the cycle of interest rate hikes by the Federal Reserve, which also strengthens market optimism.
An additional positive factor is the news of an unexpected increase in activity in the manufacturing sector of the Chinese economy. The Purchasing Managers’ Index (PMI) in China’s manufacturing sector in August hit its highest level since February, Caixin Media Co., which calculates the indicator, said on Friday. The index rose to 51 points from 49.2 in July. The consensus forecast, cited by Trading Economics, called for a rise to 49.3 points. A value above the 50-point mark indicates an increase in activity in the sector.
Benchmark oil prices, which ended last week at their highest levels this year, are little changed on Monday morning.
The price of November futures for Brent on the London ICE Futures exchange at 8:08 a.m. is $84.53 per barrel, which is 6 cents (0.07%) higher than at the close of the previous session. Last Friday, these contracts rose by $1.72 (2%) to $88.55 per barrel.
Quotes for WTI futures for October in electronic trading on the New York Mercantile Exchange (NYMEX) by this time increased by 9 cents (0.11%) to $85.64 per barrel. At the end of the previous session, they rose by $1.92 (2.3%) to $85.55 per barrel.
Over the past week, Brent rose in price by 5.5%, WTI by 7.2%, and the two brands ended trading on Friday at their highest levels since November 17 and 16, 2022, respectively.
The quotes were supported by fears of a reduction in supply in the market, as well as positive statistics from China.
The Purchasing Managers’ Index (PMI) in China’s manufacturing industry in August updated its highest level since February, Caixin Media Co. reported on Friday, which calculates the indicator. The index rose to 51 points from 49.2 points in July. A value above 50 points indicates an increase in activity in the sector.
Traders also expect Saudi Arabia to extend its voluntary production cuts by 1 million barrels per day to October.
In addition, the latest US data is “relatively balanced and generally in line with expectations that the peak level of Federal Reserve interest rates has already been reached, which in turn spurs hopes for a soft landing for the US economy,” said Tyler Ritchie of Sevens Report Research.
Meanwhile, data from the oilfield services company Baker Hughes showed that over the past week, the number of operating oil rigs in the United States remained unchanged at 512 units, the lowest since February 2022. The number of gas rigs decreased by 1 to 114.
PJSC “Ukrnafta” in January-July 2023 increased production of oil with condensate by 4.5% (by 36 thousand tons) compared to the same period of 2022 – up to 828 thousand tons, the press service of the company reported.
The average daily production of oil with condensate for seven months of 2023 was 3.9 thousand tons, 2022 – 3.7 thousand tons, 2021 – 4 thousand tons.
Ukrnafta’s gas production in January-July 2023 increased by 6.8% (by 40 million cubic meters) compared to the same period of 2022 – to 628 million cubic meters.
Average daily gas production for seven months of 2023 amounted to 2.964 million cubic meters, 2022 – 2.772 million cubic meters, 2021 – 3.015 million cubic meters.
According to the press-service, for seven months of the current year 65 workovers, 18 stimulations, 15 stimulations without workover crews, 13 coiled tubing operations were carried out at the company’s fields. 21 wells were brought out of inactivity.
“Cumulatively, these and other measures brought additional 52 thousand tons of oil and 28 million cubic meters of gas,” the company said.
In addition, Ukrnafta in January-June 2023 transferred 12.32 billion UAH of taxes to budgets of all levels, including 1.187 billion UAH of income tax for the first quarter and 2.077 billion UAH – for the second quarter.
As reported, Ukrnafta, which has been fully under state control since the end of 2022, has set a strategic goal to double its oil and natural gas production to 3 million tons and 2 billion cubic meters respectively by 2027. In 2023, the company plans to increase oil production by 5.8% (up 0.077 million tons) year-on-year to 1.447 million tons, and gas production by 0.3% (up 0.003 million cubic meters) to 1.04 billion cubic meters.
On November 5, 2022, the Supreme Commander-in-Chief decided to seize the shares of Ukrnafta and Ukrtatnafta (except for the controlling and blocking stakes of Naftohaz Ukrainy, respectively) as state property during martial law. Prior to the seizure, the structures of Igor Kolomoisky and Hennadiy Bogolyubov owned about 42% of Ukrnafta and, together with other partners, a controlling stake in Ukrtatnafta.
As of the end of March 2023, Ukrnafta had 89 fields with 23 million tons of proven reserves and with 1,806,000 active oil wells and 152 gas wells. The company operates 537 gas stations, of which 28 have been modernized. Sales at them this year are expected to reach 350,000 tons, or about 7% of the market. Last year, wholesale and retail sales of petroleum products totaled 1.665 million tons.
At the end of June 2023, the Antimonopoly Committee of Ukraine (AMCU) allowed Ukrnafta to take control of stakes in the authorized capitals of Ukrnaftoburnia, Sakhalinskoye, Sirius-1, and East Europe Petroleum, which operate in the Sakhalin gas condensate field. In general, the Sakhalin field will produce 844.3 million cubic meters of gas and 86 thousand tons of oil and condensate in 2020 and 789.5 million cubic meters and 80.8 thousand tons in 2021.
condensate, GAS, OIL, UKRNAFTA
Benchmark oil prices continue to rise on Wednesday afternoon amid concerns over Hurricane Idalia and the situation in Gabon.
The price of October futures for Brent on the London-based ICE Futures exchange at 14:29 Q2 is $86.02 per barrel, up $0.53 (0.62%) from the previous session’s close.
Quotes of futures for WTI crude oil for October at the electronic trading of the New York Mercantile Exchange (NYMEX) by the specified time increased by $0.56 (0.69%) and amounted to $81.72 per barrel.
Tropical Storm Idalia strengthened to a hurricane the day before, the National Hurricane Warning Service (National Hurricane Center, NRC) of the United States reported. On Wednesday, it was assigned category three on the Saffir-Simpson scale.
Meteorologists expect Idalia to further strengthen to an “extremely dangerous” category four storm. It is forecast to cause a dangerous rise in ocean levels and heavy downpours.
The Gulf of Mexico, where the hurricane is raging, accounts for about 15% and 5% of all U.S. oil and gas production, respectively, according to the U.S. Department of Energy’s Energy Information Administration (EIA).
Market participants are also assessing signals about changes in energy stocks in the States and following the situation in Gabon, where a group of military officers announced the deposition of President Ali Bongo Ondimba, who has been in power for 14 years and was re-elected for a third term on Saturday.
According to the American Petroleum Institute (API), oil inventories in the States collapsed by 11.5 million barrels last week.
Official data from the U.S. Department of Energy will be released at 5:30 p.m. Wednesday. Analysts surveyed by S&P Global Commodity Insights forecast that the data will indicate a reduction in oil stocks by 5.2 million barrels, gasoline – by 600 thousand barrels, distillates – by 1.4 million barrels.
Meanwhile, analysts still see no signs of disruptions in oil production in Gabon, a member of OPEC, writes MarketWatch.
