Oil Prices Sustain Uptrend as OPEC+ Postponed Meeting

Oil Prices Sustain Uptrend as OPEC+ Postponed Meeting

Oil prices maintain an uptrend on Thursday as the Organisation of Petroleum Exporting Countries and allies (OPEC+) postponed its meeting for further consultation. The oil rally was also supported by a more-than-expected drop in US crude oil inventories.

International benchmark Brent crude traded at $75 a barrel, a 0.51% increase after closing Wednesday at $74.62 a barrel.

American benchmark West Texas Intermediate (WTI) was at $73.92 per barrel at the same time for a 0.61% increase after it ended the previous session at $73.47 a barrel.

The larger-than-anticipated drop in crude oil stocks in the US, the world’s largest oil consumer, was the main driver of the limited oil price increase, as such reductions signal an uptick in demand in the country.

Inventories decreased by 1.5% for the week ending June 25, according to the latest data released by the Energy Information Administration (EIA).

Inventories fell by 6.7 million barrels to 452.3 million barrels, higher than the market expectation of a 4.4 million-barrel draw.

Investors are focused on the meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producing countries, known as OPEC+, later on Thursday when they will discuss the production policy to be adopted from August.

The group had previously agreed to gently raise production until the end of July.

Experts say Saudi Arabia is expected to take a more cautious approach due to the fragility of global oil demand, while some other countries, including Russia, will seek an output rise based on the positive demand outlook and high oil prices.

“In the high August season, OPEC+ could theoretically raise production by at least 1.5 million barrels per day to meet the demand spurt and still keep the market in equilibrium,” said Rystad Energy’s Oil analyst

She said OPEC+ is unlikely to make such a big supply shift ahead of the shoulder season, typically in autumn, to keep the market in perfect balance.

“Instead, we expect a modest supply increase more in line with the cautious approach OPEC+ has demonstrated since reigning in global supply since the mega cuts were enacted in May 2020,” she added.

OPEC and non-OPEC oil-producing countries, known as OPEC+, decided to postpone their meeting as member countries failed to reach a consensus on the output level after July.

The major oil producing countries were scheduled to hold the 31st Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 18th OPEC and non-OPEC Ministerial Meeting on Thursday.

The meeting of Saudi-led OPEC bloc of 13 countries and the Russian-led non-OPEC group that has 10 participants came amid concerns about recent outbreaks of the highly contagious COVID-19 variant Delta and the re-emergence of travel restrictions.

Convened on Thursday, the group failed to reach a consensus and decided to adjourn and continue meeting on Friday.

The group had agreed to gradually return 2.1 million barrels per day (bpd) of supply to the market during May through July, after which the curbs still in place will stand at 5.8 million bpd.

Oil Prices Sustain Uptrend as OPEC+ Postponed Meeting