Oil futures: Brent poised to finish week at 32-month high, breaks $76/b

25 Jun 2021

Quantum Commodity Intelligence – Crude oil futures were poised to finish at their highest level since October 2018 on Friday, as follow through buying, lower global stocks and an uncertain outcome from OPEC+ underpinned sentiment.

At 1630 GMT the front-month August Brent crude contract was trading at $76.10/b, up from Thursday's settle of $75.56/b and poised for a fifth consecutive week of gains.

At the same time, August WTI was trading at $74.19/b, versus Thursday’s settle of $73.30/b.

The market had rebounded earlier from a flash crash that appeared to have been triggered by a Supreme Court announcement supporting refineries attempts to escape blending mandates and supporting refinery margins.

Brent had traded as low as $75.07/b, down from $75.70/b in a matter of seconds.

A sharp draw in US crude inventories in this week’s EIA data followed by strong US jobs data on Thursday has underpinned prices during the second half of the week, but OPEC+ is expected to find it increasingly difficult to resist calls to “open the taps”.

On Friday, JP Morgan said $80/b for Brent in Q4 was now realistic, up from its previous forecast of $76/b with demand reaching 100 million bpd by December, and that's after a 500,000 bpd increase in supply from OPEC+ in August.

Some reports have suggested an additional 500,000 to 800,000 bpd from August, although producers will closely study latest demand figures.

“The group will likely prefer to stay behind the demand curve, rather than ahead of it as long as Brent doesn’t surpass $80 per barrel,” said Louise Dickson, senior analyst with Rystad Energy.

Commerzbank said in a note Friday, “…this expansion of supply is by no means likely to throw the market off track. If anything, it will not even be enough given that the oil market risks being undersupplied to the tune of 1.4 million bpd in the second half of the year.”

Meanwhile, Continental’s Harald Hamm became the latest executive to discuss the possibility of oil prices reaching $100/b.

Fracking pioneer Hamm told FOX Business $100 a barrel oil “sure is possible,” adding that the U.S. Administration’s moratorium on federal permits and the disciplined business operations of the U.S. shale patch this year have played a part in reduced oil supply.

“When you get constrained supplies you get prices that go up, and that is a lot of what is happening today,” Hamm noted.