Oil futures: Crude poised to close down 1% on OPEC+ uncertainty

15 Jul 2021

Quantum Commodity Intelligence – Crude oil futures in European trading hours Thursday extended the previous day’s losses in another day of choppy trade, as the sell-off continued over fears of higher supplies from the OPEC+ producer group and the US.

Front-month September Brent futures were trading at $74.03/barrel (1703 GMT) after bouncing off a one-week low of $73.19/b earlier in the session.

On Wednesday it settled at $74.76/b, 1% higher than current levels.

At the same time, August WTI was trading $72.35/b, down from Wednesday’s settle of $73.13/b.

Reports that Saudi Arabia and the UAE had resolved a row over baseline production levels left a number of questions unresolved, but the move could unlock a broader OPEC+ pact that sees output rise by a total of 2 million barrels per day by the end of the year.

“A number of questions remain unanswered, however. For one thing, the UAE has denied that any agreement has been reached, saying that talks are still ongoing. It is also unclear whether the UAE’s higher oil production would be set off against the planned increase in OPEC+ production, which would mean the other countries could raise their output by less," said Commerzbank in an investor note earlier in the day.

“Furthermore, other countries such as Iraq could then likewise demand the right to produce more. After all, Iraq has also expanded its production capacities considerably in recent years.”

The Energy Information Administration showed US commercial oil stocks, including crude and products, were up 2.5 million barrels over the week, despite a 7.9 million barrel draw in crude stocks and a drop in refinery utilization rates.

US crude production has increased by 600,000 bpd since late May.

Meanwhile, the latest OPEC report was met with a muted reaction, despite the producer group maintaining its firm demand outlook, including consumption exceeding 100 million bpd in the 2H of 2022.

On the demand side, containment of the Covid-19 Delta variant remains a key issue, as varying restrictions continue across the world.

“Delta is now in more than 104 countries and we expect it to soon be the dominant Covid-19 strain circulating worldwide,” the Director-General of the World Health Organisation said this week.