LONDON (Reuters) - Oil prices on Wednesday were on course for a fifth fall in what would be their longest losing streak since February, knocked by mounting concerns about Britain's possible exit from the European Union and a surprise rise in U.S. inventories.
Brent crude futures fell 70 cents on the day to $49.13 a barrel by 1125 GMT, while U.S. crude prices fell 47 cents to $48.02.
A series of production disruptions in Nigeria, Venezuela, Libya and Canada helped push oil to a 2016 high of $52.86 last week.
Data from the American Petroleum Institute, however, showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, compared with analyst expectations for a decrease of 2.3 million barrels. [API/S]
But the impending vote on the so-called Brexit is dominating everything from currency markets to German Bunds, yields of which fell below zero for the first time on Tuesday after polls showed the "Out" campaign gaining over "In". [MKTS/GLOB]
If Britain votes to leave the EU, investors fear the bloc could slip into a recession that could undermine oil demand.
"In a sense, it is putting some market participants on the sidelines and contributing to the cap on crude oil prices," Petromatrix strategist Olivier Jakob said.
"Are you going to be buying aggressively ahead of that? Maybe not, because you don't know what is going to happen, but there is no evidence of very strong selling on the back of it either," he said.
"For me, crude oil is still stuck between supports from the Nigerian disruptions and capped by falling gasoline prices."
Gasoline refining margins on both sides of the Atlantic have fallen since the start of June, as inventories have grown at a time when demand tends to be at its highest for the year.
"The broad picture at the moment is that oil is being swept up in a broad risk off move associated with Brexit primarily," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
Britain's Sun newspaper, long critical of alleged European Union excess, also came out in support of Britain leaving the EU this week.
Robust demand and production disruptions have helped balance the oil market but this equilibrium will again tip into surplus early in 2017, the International Energy Agency (IEA) said on Tuesday.
Goldman Sachs expects the oil price recovery to stall near recent price levels, it said on Wednesday, and forecast that crude would need to sustain a price of $45-$50 per barrel for the market to fall into deficit in the second half of 2016.
By Amanda Cooper
(Additional reporting by Aaron Sheldrick in Tokyo; editing by David Clarke and Jason Neely)
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In the last week, global crude oil price benchmarks have leapt up by some US$5/b. Brent is now in the US$66/b range, while WTI maintains its preferred US$10/b discount at US$56/b. On the surface, it would seem that the new OPEC+ supply deal – scheduled to last until April – is working. But the drivers pushing on the current rally are a bit more complicated.
Pledges by OPEC members are the main force behind the rise. After displaying some reticence over the timeline of cuts, Russia has now promised to ‘speed up cuts’ to its oil production in line with other key members of OPEC. Saudi Arabia, along with main allies the UAE and Kuwait, have been at the forefront of this – having made deeper-than-promised cuts in January with plans to go a bit further in February. After looking a bit shaky – a joint Saudi Arabia-Russia meeting was called off at the recent World Economic Forum in Davos in January – the bromance of world’s two oil superpowers looks to have resumed. And with it, confidence in the OPEC+ club’s abilities.
Russia and Saudi Arabia both making new pledges on supply cuts comes despite supply issues elsewhere in OPEC, which could have provided some cushion for smaller cuts. Iranian production remains constrained by new American sanctions; targeted waivers have provided some relief – and indeed Iranian crude exports have grown slightly over January and February – but the waivers expire in May and there is uncertainty over their extension. Meanwhile, the implosion in Venezuela continues, with the USA slapping new sanctions on the Venezuelan crude complex in hopes of spurring regime change. The situation in Libya – with the Sharara field swinging between closure and operation due to ongoing militant action – is dicey. And in Saudi Arabia, a damaged power repair cable has curbed output at the giant 1.2 mmb/d Safaniuyah field.
So the supply situation is supportive of a rally, from both planned and unplanned actions. But crude prices are also reacting to developments in the wider geopolitical world. The USA and China are still locked in an impasse over trade, with a March 1 deadline looming, after which doubled US tariffs on US$200 billion worth of Chinese imports would kick in. Continued escalation in the trade war could lead to a global recession, or at least a severe slowdown. But the market is taking relief that an agreement could be made. First, US President Donald Trump alluded to the possibility of pushing the deadline by 2 months to allow for more talks. And now, chatter suggests that despite reservations, American and Chinese negotiators are now ‘approaching a consensus’. The threat of the R-word – recession – could be avoided and this is pumping some confidence back in the market. But there are more risks on the horizon. The UK is set to exit the European Union at the end of March, and there is still no deal in sight. A measured Brexit would be messy, but a no-deal Brexit would be chaotic – and that chaos would have a knock-on effect on global economies and markets.
But for now, the market assumes that there must be progress in US-China trade talks and the UK must fall in line with an orderly Brexit. If that holds – and if OPEC’s supply commitments stand – the rally in crude prices will continue. And it must. Because the alternative is frightening for all.
Factors driving the current crude rally:
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A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.Why “Lubricants shelf” is key to monitor engine oil market?
The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.
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Regularly, lubricants retailers have to welcome the representatives of newly entered brands.
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However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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