Oil futures: Prices rebound as OPEC+ announces 650,000 bpd July increase
Quantum Commodity Intelligence - Crude oil futures rebounded from earlier lows Thursday on comments that the enhanced OPEC+ increase for July may not be as significant as flagged in previous press reports, with nominal increases likely to amount to only a modest hike in real terms.
Front-month August ICE Brent futures were trading at $117.03/b (1510 GMT), compared to Wednesday's settle of $116.29/b and Thursday's intraday low of $112.45.
Brent had reached a high of $118.57/b on Wednesday before being hit by a second consecutive late-afternoon selloff.
July NYMEX WTI was trading $116.14/b, versus Wednesday's settle of $115.26/b.
The OPEC+ JMMC body recommended an increase of around 650,000 bpd, as opposed to the scheduled 432,000 bpd hike in July, but markets rebounded by over $3/b on the news as, in reality, only two or three producers will be able to meet the new targets.
The WSJ set the bearish tone earlier in the week, reporting that OPEC+ might exempt Russia from its oil-production targets, which could potentially pave the way for Saudi Arabia and the UAE to pump more crude, although the topic was not discussed at Wednesday's OPEC+ committee meeting.
The Financial Times followed up Thursday, saying Saudi is prepared to raise crude production if Russia's output significantly falls following European Union sanctions, adding the de facto leader of the group is aware of the risks of a supply shortage and that it is "not in their interests to lose control of oil prices".
"From expectations of another pointless meeting rubberstamping an elusive production hike, the meeting has suddenly become a potential major market moving event," said Ole S Hansen, Head of Commodity Strategy at Saxo Group, commenting before the meeting.
However, Saudi has resisted US pressure to pump more oil so far this year, repeatedly saying the gasoline and diesel crunch is down to the shortage of refining capacity, so an additional hike in July is unlikely.
"OPEC production speculation, which sent crude sharply lower, has not been copied by the refined product market where margins are rising again," added Saxo's Hansen.
Distillate cracks jumped nearly $7/b by the European close on Wednesday as Brent gave back some gains while low sulfur gasoil futures rose to their highest level since the March 9 spike and close to levels seen during the 2008 distillate shortage, according to Quantum data.
Gasoline Eurobob cracks continued their rally for a sixth straight session, as spot cracks gained $7/b to $64.3/b – a fresh record high.
In the US, the 3:2:1 WTI crack (three WTI contracts versus two gasoline and one ULSD) has consolidated well above $50/b this week.
US crude inventories decreased by 1.18 million barrels in the week ending May 27, according to the American Petroleum Institute (API) reported late Wednesday. Gasoline stocks were down by 256,000 barrels, while distillate inventories rose by 858,000 barrels.
On the economic front, JPMorgan Chase CEO Jamie Dimon said he is preparing the biggest US bank for an economic hurricane on the horizon and advised investors to do the same.
"You'd better brace yourself," Dimon told a New York conference. "JPMorgan is bracing ourselves, and we're going to be very conservative with our balance sheet."
UK markets are closed for a national holiday Thursday and Friday.
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The outcome and market reaction to the latest EIA inventory data will be published here
