Oil futures: Brent up to $76/b on prolonged OPEC+ talks, US jobs data

2 Jul 2021

Quantum Commodity Intelligence - Crude oil futures pushed higher in late London trading Friday as OPEC+ talks dragged on, while encouraging US jobs data underpinned prices with non-farm payrolls up 850,000 vs 720,000 expectations. 

Front-month September Brent futures were trading at $76.08/barrel (1705 GMT), compared to Thursday’s settle of $75.84/b and up from $75.50/b earlier in the session. 

At the same time, August WTI was trading at $75.14/b, versus Thursday’s settle of $75.23/b.

Friday's OPEC+ Joint Ministerial Monitoring Committee (JMMC) was said to have got off to a late start, further delaying the full ministerial meeting. 

A deal looked set to be rubber-stamped on Thursday after the group’s technical JMCC panel had recommended incremental hikes of 400,000 bpd each month for the rest of the year, totalling an additional 2 million bpd by the year end.

“The full OPEC+ ministerial meeting failed to ratify the monitoring committee’s recommendation. Those objections were more technical, with members such as UAE promising support if the baseline for its own cuts were raised,” said Daniel Hynes, senior commodity strategist at ANZ. 

Last November, Energy Intelligence reported that some UAE officials have started privately to ask hard questions about whether OPEC membership remains in the country's longer-term interest.

The report said the UAE has long been one of the most committed and compliant OPEC members, but current production curbs sit awkwardly with Abu Dhabi's plan to expand oil production capacity by some 1 million barrels per day by 2030.

According to reports Friday, the UAE wants its baseline adjusted to April 2020 levels of around 3.8 million bpd, rather than the October 2018 production level of 3.168 million bpd.

"Negotiations today will be difficult as OPEC+ knows that if the UAE is allowed to produce from a different base, other members may protest. On the other hand the UAE’s nod is needed to shape a common policy for the rest of the year that everyone will adhere to," said Louise Dickson, senior analyst with Rystad Energy.

The UAE has said it is not against extending the OPEC+ Declaration of Cooperation, but is asking for a revision of its baseline production figure. The original DOC agreement was announced in December 2016, bringing together OPEC and non-OPEC producers. 

Commenting on the reported JMMC recommendation, one Middle East analyst told Quantum, “that helps address expected deficit for August and allows OPEC to regain market share.

“Also [the increases are] enough to ensure compliance doesn’t weaken as flat price remains above $70/b. It gives guidance to the market and enough of a range to adjust accordingly on a monthly basis.”