Oil Prices Stable As OPEC Delay Planned Output Increase Policy

Yemisi Izuora

Oil prices was stable on Friday after the Organization of Petroleum Exporting Countries, OPEC+ Ministers delayed a meeting on output policy as the United Arab Emirates took exception at a plan to add back 2 million barrels per day (bpd) in the second half of the year.

Subsequently, the U.S. West Texas Intermediate (WTI) crude futures were up 5 cents at US$75.28 a barrel having jumped 2.4 per cent on Thursday to close at their highest since October 2018, while the Brent crude futures inched up 4 cents to US$75.88 a barrel, after rising 1.6 per cent on Thursday.

Both benchmark contracts posted strong gains on Thursday as a plan backed by Saudi Arabia and Russia for the Organization of Petroleum Countries and allies, together known as OPEC+, to add back 400,000 bpd each month from August through December 2021 was more cautious than investors had expected.

Prices retreated after the plan met resistance from the UAE and OPEC+ postponed a ministerial meeting to Friday.

“Failure to come to an agreement could mean that the group continues with current levels of production, which would mean that the market tightens even quicker,” ING commodities strategists said in a note.

If existing curbs are extended, however, some OPEC+ producers may be less willing to stick to their quotas, which would result in an increase in supply, ING said.

WTI was on track for a 1.6 per cent rise for the week with the U.S. crude market seen tightening as refinery runs pick up to meet recovering gasoline demand, while U.S. shale oil production has not risen at the same pace.

Brent was heading for a 0.5 per cent fall for the week, reflecting concerns about fuel demand in parts of Asia where cases of the highly contagious COVID-19 Delta variant are surging.

Citi analysts said they do not expect WTI to climb to a premium to Brent, as they expect U.S. oil output to pick up at the end of 2021 and grow further in 2022.

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