Oil swing – OPEC + resolves standoff
Oil prices fluctuated as Saudi Arabia, and the United Arab Emirates were said to have reached an agreement to end the standoff that had prevented OPEC+. Oil prices fluctuated from meeting a growing demand for additional barrels.
Futures in New York hovered near $75 per barrel, having settled on Tuesday at their highest close since late 2018. According to one delegate, the OPEC+ coalition will set a new meeting date soon after the UAE secures a higher production baseline. The point of contention scuttled last week’s OPEC+ meeting and threatened the alliance’s unity.
In theory, resolving the breach should allow the Organization of Petroleum Exporting Countries and its partners to move forward with plans to restart output that halted since the pandemic. The 23-nation bloc intends to restore supplies in 400,000 barrels per day increments until late 2022.
The market
The market has demonstrated a strong desire for additional supplies. According to an industry report released ahead of government data due later on Wednesday, American crude inventories fell significantly again last week. The country’s oil demand has reached new highs, with gasoline and diesel prices returning to pre-pandemic levels.
Oil has risen more than 50% this year as the vaccine rollout boosts demand in major economies such as the United States and China while fostering a recovery in Europe. Futures prices show a premium on shorter-term contracts, a phenomenon as backwardation, which typically indicates tightness.
The International Energy Agency warned that if the OPEC+ alliance does not resolve the standoff, the market will tighten significantly. Nonetheless, the spread of the coronavirus variant poses a growing threat to the global outlook. The number of positive cases in Indonesia reached an all-time high, while Sydney imposed a curfew.
The American petroleum institute
According to people familiar with the data, the American Petroleum Institute reported that crude inventories fell by more than 4 million barrels last week. According to a Bloomberg survey, the Energy Information Administration has expected to register a similar reduction later on Wednesday.
The oil market is in trouble, said Stephen Brennock, an analyst at PVM Oil Associates Ltd. Fears are growing that an increase in Covid-19 Delta cases will delay full economic recovery. That, in turn, poses a significant threat to short-to-medium-term growth in oil demand.
That would be the eighth consecutive weekly draw in a row, the longest run of declines since January 2018. A surge in the use of petroleum for products such as plastic, asphalt, lubricants, and other industrial needs is aiding the recovery.
