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Oil prices have always been manipulated. From Drake(1859) to Opec(1971) oil prices were kept artificailly low by the major refiners becuase their refinery margins are better at low crude oil prices than high. For the record Exxon is a net crude oil buyer not a seller, they only make money by selling gasoline. In 1971, we had the first Arab oil embargo and then the price was made artificially high when OPEC was able to restrict production and create an under supply situation. Then oil began trading as a commodity in 1981, yet the supply was still short. The first time in history that the market actually reflected the true price of oil was 1986 when prices dropped from around $40/bbl to less than $8/bbl. At that time supply was close to 75 mmbopd versus demand of around 55 mmbopd. Prices stayed low until the 1990's as consumption increased 2 mmbopd/year while the production side was in a depression and created no new supply. Just a little history, sorry.
Goldman and 3 or 4 hedge funds control about 60% of the market trades on the CME. They were caught a few years back making 100,000,000 barrel 24 hour round trip trades to insure their position. In an over supply situation the speculators will control prices not OPEC.
While energy stocks outperformed, a slump in mainland China stocks to 2-1/2 month lows dampened any broader interest in riskier assets in Asia, offsetting overnight gains on Wall Street. "The market environment is not bad overall. Oil prices are rising, which would benefit oil producing countries. But Asia may be hurt by concerns about the Chinese economy," said Shuji Shirota, associate director at HSBC in Tokyo. "The market's focus is returning to the Fed, given rising expectations that they could hike rates much earlier than expected. That is weighing on many emerging markets as well," he said. Japan's Nikkei rose 0.3 percent but MSCI's broadest index of Asia-Pacific shares outside Japan was almost flat, struggling to extend its rebound from Tuesday's 12-week low. It had gained 1.2 percent on Wednesday. Shanghai shares fell more than 1 percent, with sentiment frail after a series of disappointing economic data earlier this month and fears that policymakers may be taking a more cautious stance on further stimulus as debt levels grow.
Share prices rallied globally overnight, led by European banks, which benefit from a decision by euro zone finance ministers to unlock new funds for Greece and to give it a firm offer of debt relief. On Wall Street, U.S. S&P 500 Index rose around 0.7 percent to 2,091, its highest in almost a month and near its six-month intraday high of 2,111. Energy stocks outperformed on the back of continued recovery in oil prices, which hit seven-month highs after the U.S. government reported a larger-than-expected drop in crude inventories. [O/R] Global benchmark Brent futures rose 34 cents or about 0.6 percent to as high as $50.08 per barrel, the highest level since early November. U.S. West Texas Intermediate (WTI) hit $49.88, a seven-month high. The rally in U.S. and European shares came even as investors readied themselves for monetary tightening by the U.S. Federal Reserve as early as next month.
The yield on two-year U.S. notes rose to a 10-week high of 0.938 percent on Wednesday as investors priced in the likelihood of the Fed raising its federal funds target rate to 0.50-0.75 percent from the current 0.25-0.50 percent in coming months. It last stood at 0.903 percent, almost a quarter percentage point above this month's low of 0.686 percent. Market players are awaiting comments by Fed Chair Janet Yellen at a Harvard University event on Friday, though many also say her speech scheduled for June 6 - after new U.S. payrolls data comes out - would be even more crucial. Recent comments by Fed policymakers have put a possible rate hike this summer firmly on the table for discussion, but U.S. interest rate futures <0#FF:> are still pricing in only about one-third chance of a rate hike in June and about a 60 percent likelihood by July.
The prospects of higher U.S. interest rates undermined the attraction of gold, which fell to a seven-week low of $1,217.90 per ounce though it came back up a tad in Asia to trade at $1,231. In the currencies, sterling rose to $1.4700, near its four-month peak of $1.4770 hit earlier this month, as several bookmakers widened the odds on a British "Brexit" from the European Union after opinion polls showing the "in" camp leading. The dollar was generally supported by U.S. rate hike expectations, while the euro stood at $.1151, having hit a 10-week low of $1.1129 overnight. But it saw a 0.5 percent loss against the yen to 109.64 yen in early Asian trade in an erratic move.
Oil prices top $50, Asian shares struggle on China worries
Oil prices have plunged during the past year, hurting oil exporting nations and petroleum companies, which cut jobs and investments in the oil industry. Economists say the damage to demand in the economy was larger than expected, while the boost to consumers from lower gasoline prices had less impact than experts predicted. As a result, investors worried and stock markets had faltered. But Thursday, many global stock markets made gains as oil prices rose to their highest level in seven months.
A attendant fills up a car at a gas station in Jiddah, Saudi Arabia, Sept. 15, 2015. Oil prices rose above $50 a barrel Thursday for the first time this year.
The earlier price plunge grew out of a surge in oil production from advanced technologies, like fracking in the United States, which boosted oil supplies. In the past when supplies were higher than demand, OPEC nations, particularly Saudi Arabia, have cut production to keep prices strong. But the Saudis have changed their strategy, maintaining production, perhaps hoping that falling prices would force competitors, particularly those that have higher production prices, out of business.
Over the long term, experts at the Organization of Petroleum Exporting Countries predict population growth will boost demand for energy by 50 percent, and oil products will fill most of that demand for decades to come. OPEC says the global population will grow by 1.7 billion by 2040, and the number of private cars will double to more than two billion, while electric service will expand to many people who now lack access.
Lower Supplies Boost Oil Prices, With Demand Expected to Grow
Tensions between the Sunni-led kingdom and the Shi'ite Islamic Republic have been the highlights of several previous OPEC meetings, including in December 2015 when the group failed to agree on a formal output target for the first time in years. Several OPEC sources said Saudi Arabia and its Gulf allies would propose to set a new collective ceiling in an attempt to repair OPEC's waning importance and end a market-share battle that has sapped prices and cut investment.
Failure to reach any deal would revive market fears that OPEC's largest producer Saudi Arabia, already pumping near record highs, may raise production further to punish rivals and gain additional market share. "We will be very gentle in our approach and make sure we don't shock the market in any way," new Saudi Energy Minister Khalid al-Falih told reporters ahead of the meeting. "There is no reason to expect that Saudi Arabia is going to go on a flooding campaign," Falih said when asked whether Saudi Arabia could add more barrels to the market. Answering a question on whether Riyadh would propose setting a collective output ceiling, he said: "We will do that when necessary." He added that he would listen to anything Iran brings to the table.
Any agreement between Riyadh and Tehran would be seen as a big surprise by the market, which in the past two years has grown increasingly used to clashes between the political foes as they fight proxy wars in Syria and Yemen. Saudi Arabia effectively scuppered plans for a global production freeze - aimed at stabilising oil markets - in April. It said then that it would join the deal, which would also have involved non-OPEC Russia, only if Iran agreed to freeze output. Tehran has been the main stumbling block for the Organization of the Petroleum Exporting Countries to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argues it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran's nuclear program. Iranian Oil Minister Bijan Zanganeh said Tehran would not support any new collective output ceiling and wanted the debate to focus on individual country production quotas. "Without country quotas, OPEC cannot control anything," Zanganeh told reporters. He insisted Tehran deserved a quota - based on historic output levels - of 14.5 percent of OPEC's overall production.
OPEC is pumping 32.5 million barrels per day (bpd), which would give Iran a quota of 4.7 million bpd - well above its current output of 3.8 million, according to Tehran's estimates, and 3.5 million, based on market estimates. Zanganeh said he supported a candidate from Nigeria for the post of OPEC secretary-general, which could emerge as a rare compromise within the organization if Riyadh also backs the appointment.
COUNTRY QUOTAS
Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran's crude shipments are now being handled by foreign vessels. "Charterers are buying cargo from Iran and the rest of the world is OK with that," said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude. Some international shipowners remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran that remain and prohibit any trade in dollars or the involvement of U.S. firms, including banks and reinsurers. Iran is seeking to make up for lost trade following the lifting of sanctions imposed in 2011 and 2012 over its nuclear program.
Port loading data seen by Reuters, as well as live shipping data, shows at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran's Kharg Island and Bandar Mahshahr terminals. The resumption of international shipping of Iranian oil has been made possible by an increase in interim, limited, insurance cover by "P&I clubs" - maritime mutual associations that provide "protection and indemnity" insurance to shippers. The International Group of P&I Clubs, which represents the world's top 13 ship insurers, increased the amount covered by so-called "fall-back" shipping insurance from 70 million to 100 million euros ($113.36 million) in April. "In the first days after lifting sanctions only Iranian ships were loaded in the country, mainly due to several problems in finding insurance/reinsurance," said Luigi Bruzzone of ship broker Banchero Costa. "The strong interest of the market in these trades pushed all the stakeholders to solve all the problems ... and almost all P&I Clubs have granted their insurance."
INSURANCE RISK?
The "fall-back" cover is designed to offset any shortfall in payments from U.S. reinsurers, who are still not allowed to deal with Iran. "We are not surprised to see the increase in Iranian cargoes given the progress made by the P&I clubs and obviously the increase in Iranian production," said Brian Gallagher, head of investor relations at leading Belgian tanker owner Euronav, which itself is not involved in Iran yet. "We're interested in such trade ... (but) it will still take time for Iran to be fully integrated as there remain restrictions around dollar denominated transactions." Indeed, while the partial lifting of sanctions means foreign tankers can now transport Iranian oil, risks remain because large accidents might not be fully covered.
As a result, insurers say many first-tier oil shippers, many of them publicly listed such as Euronav, Teekay Group or Frontline, still shy away from carrying Iranian oil. If the fall-back cover is exhausted in an incident, Andrew Bardot, executive officer at the International Group of P&I Clubs, said that costs like "collision and cargo liabilities, will not be covered, and will remain with the shipowner". A single Very Large Crude Carrier (VLCC) supertanker costs around $90 million, and the costs of a large oil spill can reach into the billions of dollars. "The limitations of the 'fall-back' cover - together with other continuing restrictions, for example those relating to the U.S. dollar and use of the U.S. financial system - however have discouraged a number of shipowners, and in particular the large shipping groups, from resuming trade with Iran in which they were previously engaged," said Bardot.
NEAR PRE-SANCTIONS LEVELS
An index of world equity markets snapped a five-day winning streak. Oil prices snapped a three-day rally as traders took profits, pulling commodity-related stocks lower. Global stocks were hit after European Central Bank President Mario Draghi warned that monetary policy alone would not avert the risk of Europe suffering lasting economic damage from weak productivity and low growth. The ECB started buying back corporate bonds on Wednesday, which along with the concerns about Britain's referendum on European Union membership, pushed British and German sovereign debt yields to record lows.
U.S. Treasury yields fell to three-and-a-half month lows on fading chances of the Federal Reserve raising interest rates at its policy meeting next week. A combination of oil prices, Draghi's warning and some risky events especially the UK vote later in the month are affecting the market, said Julian Emanuel, a U.S. Equity and Derivative Strategist at UBS. "What we have seen is that the public has been cautious and that wall of worry is ... challenging valuations ahead of some discreetly risky events and today's profit taking is almost a natural process," Emanuel said.
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At 12:47 p.m. ET the Dow Jones Industrial Average <.DJI> was down 60.85 points, or 0.34 percent, at 17,944.2. The S&P 500 <.SPX> was down 8.39 points, or 0.4 percent, at 2,110.73 and the Nasdaq Composite <.IXIC> was down 26.46 points, or 0.53 percent, at 4,948.18. Nine of the 10 major S&P sectors were lower, led by a 1.2 percent decline in the financial index <.SPSY>. The KBW Bank Index <.BKX> was off 1.8 percent. The financial index is the only one of the S&P sectors in the red for this year, hit by concerns of bad debt on loans to energy companies, uncertainty about interest rates and fears of slowing global growth.
Traders work on the floor of the NYSE in New York City
Goldman Sachs <GS.N> fell 1.2 percent and was the biggest drag on the Dow, while Wells Fargo's <WFC.N> 2 percent decline pulled the S&P down the most. Chesapeake Energy <CHK.N> fell 5.8 percent to $4.68 after an RBC downgrade. Other energy stocks also dropped with oil prices. J.M. Smucker <SJM.N> jumped 7.3 percent to $142.39 after the processed foods maker reported better-than-expected rise in quarterly sales. Declining issues outnumbered advancing ones on the NYSE by 2,045 to 911. On the Nasdaq, 2,027 issues fell and 707 advanced. The S&P 500 index showed 43 new 52-week highs and no new lows, while the Nasdaq recorded 61 new highs and 23 new lows.
Wall St. drops with banks and oil as bonds rally
More and More Oil Ships Anchored off Major Seaports
The two mentioned are Singapore and Rotterdam. And this articles says price has little to do with it claiming it's a case of not having onshore storage for the cargoes. Too much crude, not enough storage, and lack of refineries.
Read the full story @ Why are more and more oil ships anchoring off Singapore?
Brent crude futures had climbed 13 cents, or 0.3 percent, to $48.90 per barrel by 0643 GMT, after jumping 5.2 percent last week in their first weekly gain in six weeks. U.S. West Texas Intermediate (WTI) crude futures rose 17 cents, or 0.4 percent, to $46.21 per barrel, adding to last week's 7-percent gain. U.S. prices were lifted as drilling activity in the United States for new oil production fell for the first time since January, dropping by two rigs. Futures brokerage AxiTrader said on Monday that this was "the first crack in the resolve of U.S. shale oil to continue to ramp up production regardless of the big fall in price" earlier this year.
A wellhead is seen at an Occidental Petroleum Corp carbon dioxide enhanced oil recovery project in Hobbs, New Mexico
Despite the dip in U.S. drilling activity, the total rig count was still more than double the 341 rigs in the same week a year ago, according to energy services firm Baker Hughes Inc. However, traders said that WTI prices were also being supported by expectations of strong gasoline consumption on the July 4 holiday in the United States. Globally, oil markets remain oversupplied as output from within the Organization of the Petroleum Exporting Countries (OPEC) hit a 2017 high.
June OPEC production was up by 280,000 barrels per day (bpd) to 32.72 million bpd, according to a Reuters survey, despite the group's pledge to hold back output in an effort to tighten the market. "To put that in context, that is nearly a quarter of the 1.2 million barrels (per day) OPEC agreed to cut," said Greg McKenna, chief market strategist at AxiTrader, adding this increase was driven by higher output from Nigeria and Libya, which were exempted from the cuts.
Oil prices rise on first drop in U.S. drilling in months
The producer is expected to raise flagship Arab Light’s December official selling price to at least 90 cents a barrel above Oman/Dubai quotes, the survey of five refiners showed. That would be the highest premium since $1.65 in September 2014, according to Reuters data. Prices for heavier grades may see a bigger boost in December, the survey showed, with Arab Heavy’s OSP set to rise to at least $1.30 below Oman-Dubai quotes. That would be the narrowest discount for Saudi heavy crude since minus $1.05 in December 2013, according to Reuters data.
The increases would come on the back of stronger Middle East crude benchmark prices and firm refining margins, the respondents said. Dubai’s backwardation widened in October compared with the previous month. In a backwardated market, prompt prices are higher than those in future months signaling strong demand for spot cargoes. Complex refining margins in Singapore, a gauge of refiner profitability in the region, held above $7 a barrel for a fourth month in October, Thomson Reuters Eikon data showed.
Gains in naphtha margins could prop up Arab Extra Light’s OSP in December by at least 50 cents a barrel, the survey showed.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.
Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices. Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.
Saudi Arabia may raise December crude oil prices to Asia to highest in few years
