Saudi Arabia and Russia have proposed relaxing output caps without consulting most fellow producers
Brent set for second weekly decline as investors await Opec meeting
Oil in London headed for a second weekly decline as investors tried to gauge whether Opec and its allies will ease production caps at what’s set to be a contentious meeting next week.
Brent crude was little changed Friday, on course for a 0.7 per cent drop this week. Saudi oil minister Khalid Al Falih said it’s “inevitable” the group will decide to boost output gradually when it meets on June 22, while Iran, Iraq and Venezuela oppose an increase. US futures headed for a 1.9 per cent weekly gain after nationwide stockpiles slumped the most since March, narrowing the gap between the American and European markers.
Both benchmarks have struggled to regain the highs of May after Saudi Arabia and Russia proposed relaxing output caps without consulting most fellow producers, and as US President Donald Trump continued to criticise the Organisation of Petroleum Exporting Countries for boosting prices. Meanwhile, two of Libya’s biggest oil ports halted loading on Thursday after clashes erupted between rival forces, taking barrels off the market.
“Given the signals from Saudi Arabia and Russia that view easing of production limits as inevitable, the market is still left wondering how much and when,” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. “With extremist clashing in Libya forcing the closure of Es Sider oil export terminal, oil has been testing the upper end of the recent ranges overnight, but again Opec supply uncertainty is capping gains, particularly against Brent.”
Brent futures for August settlement were at $75.95 a barrel on the London-based ICE Futures Europe exchange, up 1 cent, at 12:59 p.m. in Seoul. The contract dropped 1 per cent to $75.94 on Thursday. The global benchmark crude traded at a $9.18 premium to WTI for the same month.
WTI crude for July delivery traded at $66.98 a barrel on the New York Mercantile Exchange, up 9 cents. The contract is poised for the first weekly advance in a month. Total volume traded was about 44 per cent below the 100-day average.
Futures fell 0.3 per cent to 466.6 yuan a barrel on the Shanghai International Energy Exchange. The contract is set for a fourth weekly decline.
The oil market has been whipsawed this month as various comments from global producers on whether the time has come to ease output cuts continued to sway sentiment. With prices last month recovering to 2014 levels and global inventories shrinking, the International Energy Agency had warned that crude demand growth could slow as reimposed sanctions on Iran by the U.S. and output declines from Venezuela tighten the market further.
Saudi Arabia’s Al Falih and Russian counterpart Alexander Novak met Thursday in Moscow, as the two nations played in the football World Cup. While they share an understanding on the need for a smooth increase, they must convince other members of the Organization of Petroleum Exporting Countries to drop their opposition and endorse a production hike when they meet in Vienna next week.
Opec and its allies could consider an output increase of as much as 1.5 million barrels a day, according to Novak. That would be enough to offset the supply losses from Venezuela and Iran as foreseen by the International Energy Agency. Saudi Arabia has been discussing different scenarios that would raise production by between 500,000 and 1 million barrels a day, according to people familiar with the matter.
In the US, the decline in nationwide crude stockpiles helped buoy WTI prices this week. The Energy Information and Administration said inventories fell 4.14 million barrels last week, more than the estimate in a Bloomberg survey. Gasoline and distillates also slid, while domestic oil production climbed to 10.9 million barrels a day, topping 10 million barrels a day every week since early February, according to the EIA.