Oil Prices for Jul. 02, 2021: Brent Crude, WTI - Bloomberg

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Oil is poised for a weekly advance as infighting within OPEC+ delayed a much-anticipated decision on boosting output, risking an inflationary spike in prices.

Futures in New York traded between small gains and losses on Friday but were up 1.5% for the week. An OPEC+ meeting on Friday began in the midst of a tense diplomatic standoff after the group failed to reach a final agreement on Thursday. The United Arab Emirates is willing to accept unchanged output if no new deal can be reached, a delegate said. That would squeeze an already tight market.

“Demand is continuously outstripping supply, even if you do get the gradual increase, demand will come on a lot faster, a lot stronger than they can raise output,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago.

Oil jumped more than 10% last month with the summer driving season boosting demand for U.S. crude and gasoline. The Organization of Petroleum Exporting Countries and its alliance have thus far taken a gradual approach to returning shuttered supplies, and calls for more output have increased in frequency. The world’s third-biggest oil consumer, India, has raised concerns about price pressures, with the nation expecting fuel consumption to return to pre-pendemic levels by the end of this year.

The OPEC+ disagreement centers on how the group measures its production cuts, with the UAE refusing to back a deal to raise output unless the baseline for its own curbs is increased, according to delegate.

The standoff prompted some selloff, especially for speculative traders in the U.S. who are headed into a holiday weekend, said Gary Cunningham, director of market research at Tradition Energy.

“We’re seeing people close out those bullish positions and we get a little bit of selling,” he said.

Prices
West Texas Intermediate for August delivery was 5 cents lower at $75.18 a barrel at 1:17 p.m. in New York Brent for September settlement rose 22 cents to $76.06 a barrel

The dramatic turn of events at OPEC+ leaves the market in limbo and tarnishes the cartel’s carefully reconstructed reputation after last year’s brutal Saudi-Russian price war.

The UAE’s production cuts are measured from a starting point in 2018, which set its maximum capacity at 3.168 million barrels a day. But expansion projects have since raised that number to close to 4 million barrels. Reflecting that new capacity in its baseline could allow it to pump hundreds of thousands of barrels a day of extra crude.

Other oil-market news

OPEC boosted oil production last month by the most in a year, in line with plans to meet rising demand as countries recover from the pandemic. A tally of seaborne oil exports from 29 countries or regions for June shows an aggregate increase of about 700,000 barrels a day versus May, according to tanker tracking data compiled by Bloomberg News. Russia reduced oil production in June, despite a more generous quota from the OPEC+ alliance. Producers pumped 42.64 million tons of crude and condensate last month, according to preliminary data from the Energy Ministry’s CDU-TEK unit.

— With assistance by Elizabeth Low, and Alex Longley

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