- Oil Climbs as Iran, Iraq Signal Deal Hope Before Vienna Meeting
Oil extended gains as Iran signaled optimism OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster the group’s unity before members meet next week in Vienna.
Prices rose as much as 1.4 percent in New York, adding to its 5.3 percent gain last week. Iranian Oil Minister Bijan Namdar Zanganeh said it’s “highly probable” members will reach a consensus, according to comments published by the country’s Shana news service. Iraq will offer three new proposals for the output cut deal this week that are consistent with the group’s policies, The Wall Street Journal reported, citing Iraq Oil Minister Jabbar al-Luaibi.
Oil has rebounded since hitting the lowest in almost two months last week as members of the Organization of Petroleum Exporting Countries began making renewed diplomatic efforts before their meeting Nov. 30 to finalize the output deal informally agreed to in September. The group is seeking to trim output for the first time in eight years, a plan that has been complicated by Iran’s commitment to boost production and Iraq’s request for an exemption to help fund its war with Islamic militants.
“It’s pretty clear that some people are convinced in the market that this could lead to production cuts,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. “The potential for breaches of any announced agreement is very high, but it is a solid move and it is coming on pretty reasonable volumes.”
West Texas Intermediate for December delivery, which expires Monday, rose as much as 66 cents to $46.35 a barrel on the New York Mercantile Exchange and was at $46.35 at 1:22 p.m. in Hong Kong. Total volume traded was about 9 percent above the 100-day average. The more-active January contract added as much as 70 cents, or 1.5 percent, to $47.06 a barrel.
Brent for January settlement gained as much as 68 cents, or 1.5 percent, to $47.54 a barrel on the London-based ICE Futures Europe exchange. The contract closed at $46.86 a barrel on Friday, capping a 4.7 percent gain for the week. The global benchmark traded at a premium of 51 cents to January WTI.
It’s likely that OPEC producers will honor the output cut agreement and will try to put it into action, Iran’s Zanganeh said after meeting with OPEC’s secretary-general, Mohammed Barkindo, in Tehran on Saturday. Iraq’s new proposals “are based on other variables and will make it easier for OPEC members to make a decision,” Oil Minister al-Luaibi was cited as saying in an interview with The Wall Street Journal.
- Russian President Vladimir Putin said he sees no obstacles to OPEC reaching a pact later this month, and Russia is willing to freeze its crude oil output at current levels.
- Money managers, producers and consumers made the biggest bets on WTI in nine years, amid signals more volatility is coming.
- Oil drillers added the most rigs in 16 months amid growing confidence that crude prices will rise in coming months, according to Baker Hughes Inc. data reported Friday.
Oil Prices Drop on Stronger U.S Dollar
The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.
The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.
The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.
“Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.
“The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.”
The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.
A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.
Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.
Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.
“This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.
Oil Rises as Threat of Immediate Iran Supply Recedes
Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.
Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.
A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.
It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.
Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.
“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.
To meet rising demand, U.S. drillers are also increasing output.
U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.
Oil Prices Rise as Demand Improves, Supplies Tighten
Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.
Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.
U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.
“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.
“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”
Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.
The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.
“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.
The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.
IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.
The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.
On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.
U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.
It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.
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