Crude Oil Prices Rally ahead of OPEC+ Meeting on July 1
Crude oil prices rally on Friday ahead of the scheduled meeting of the Organisation of Oil Exporting Countries and allies (OPEC+) on July 1s, 2021. Driving the upward trajectory include demand growth expectations as major oil producers will take a cautious approach to output increases.
International benchmark Brent crude settled at $75.72 a barrel after 0.21% increase from $75.56 a barrel. American benchmark West Texas Intermediate (WTI) traded at $73.47 a barrel at the same time for a 0.23% rise after ending the previous session at $73.30 per barrel.
Oil maintains uptrend due to the acceleration of vaccination campaigns against the COVID-19 pandemic, the easing of travel restrictions, and the increasing rate of domestic and international travels.
Also, the start of the summer driving season are raising oil demand and reflecting positively in higher oil prices. British Transport Secretary Grant Shapps announced updates Thursday to the UK’s “traffic light system” for overseas travel that divides countries into red, amber and green lists.
Record shows that from June 30, Malta, Madeira, the Balearic Islands, several UK overseas territories, and Caribbean islands will be added to the government’s green list. The full list of countries to be added to the red list includes Eritrea, Haiti, Dominican Republic, Mongolia, Tunisia and Uganda.
Belgium also announced that it would allow fully vaccinated people living in most non-EU countries that are considered red travel zones to make non-essential journeys to the country again.
Investors are now focused on the meeting of OPEC and non-OPEC oil-producing nations on production cut strategy after July. A leak this week that OPEC+ was considering a 500,000 bpd increase in production in August followed by similar hikes afterwards set expectations for next week’s meeting
The group had previously agreed to gently raise production until the end of July. Brent above $75 certainly raises the odds of additional crude coming to market but the lack of a nuclear deal in Iran clouds the picture.
US and Iran officials have agreed to most of the things in a deal — including removing sanctions on Iran’s oil — but can’t agree on sequencing and provisions to keep the US from exiting the deal again.
That uncertainty may keep OPEC+ from announcing a larger hike or laying out plans beyond August.
For now, the oil market continues to signal tightness. Dips in crude have been bought aggressively and that was demonstrated again in the last hour as a dip to $72.90 from $73.73 was quickly bid back up. Baring a huge turnaround this will be the fifth consecutive week of gains for crude in a straight-line move to $75.70 from $64.00.
Positive demand sentiments were also helped by the administration of US President Joe Biden’s much-awaited $1.2 trillion expenditure on an infrastructure framework.
Biden had announced his agreement earlier to support a bipartisan infrastructure framework that was formed by a group of senators. The framework involves the expenditure of $1.2 trillion over eight years, including $579 billion in new spending for the first five years.
The plan will cover investments in clean transportation, universal broadband, clean power, rebuilding roads and bridges, modernizing transit and rail networks while reducing greenhouse gas emissions. The better-than-expected economic data from the US, the world’s largest oil consumer, also instilled hope of a sooner economic and oil demand rebound.
Initial jobless claims fell 7,000 to 411,000 last week, the Labor Department said Thursday. Analysts expected claims of 380,000 for the week ending June 19.
Crude Oil Prices Rally ahead of OPEC+ Meeting on July 1
