Oil trades near $67 as Saudi Arabia sees "inevitable" supply boost
LONDON (Bloomberg) -- Oil steadied just below $67/bbl as Saudi Arabia’s energy minister said an OPEC agreement to raise production is “inevitable.”
Futures in New York rose 0.5% after a 1.4% increase in the past three sessions. After talks in Moscow last night, Saudi Energy Minister Khalid Al-Falih said Thursday he expects OPEC to reach a deal to gradually boost output. His Russian counterpart Alexander Novak said they agree on the need for an increase, but the volume and timing of the extra production are still under discussion.
The Organization of Petroleum Exporting Countries and its allies will meet next week in Vienna at what’s likely to be a contentious summit. Saudi Arabia and Russia are facing opposition from Iraq, Iran and Venezuela on their proposal to relax output caps, while Washington continues to criticize the cartel for boosting prices. Russian President Vladimir Putin will hold talks with Saudi Crown Prince Mohammed bin Salman later Thursday.
“Those in the know might get a hint as early as today -- the topic will surely come up between President Putin and the Saudi crown prince as they watch their countries’ teams in today’s opening game of the football World Cup,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
West Texas Intermediate crude for July delivery traded at $66.94/bbl on the New York Mercantile Exchange, up 30 cents, at 12:22 p.m. London time. The contract climbed 28 cents to $66.64 on Wednesday. Total volume traded Thursday was about 21% below the 100-day average.
Brent futures for August settlement traded at $76.80/bbl on the London-based ICE Futures Europe exchange, up 6 cents. The contract advanced 86 cents on Wednesday. The global benchmark crude traded at a $9.97 premium to WTI for the same month.
Crude rallied to a three-year high in May, and subsequently lost steam as Saudi Arabia and Russia signaled they may raise output. Despite their proposal, U.S. President Donald Trump on Wednesday criticized OPEC for inflating prices. Meanwhile, the International Energy Agency said Iran and Venezuela could lose almost 30% of their output by the end of next year due to U.S. sanctions and economic upheaval, requiring extra supplies from OPEC’s Gulf members.
Saudi Arabia is mulling various different scenarios to raise supplies. One proposal envisages a single hike of just 500,000 bpd. Another would see an immediate increase of 500,000 bbl followed by a similar addition in the fourth quarter. The kingdom has also shared ideas that float an increase of about 600,000 to 700,000 bpd.
In the U.S., government data showed crude stockpiles declined by 4.14 MMbbl last week, steeper than estimated by analysts in a Bloomberg survey. The drop also ran counter to an industry report a day earlier showing an increase. Gasoline and distillates also slid last week, the Energy Information Administration said. Meanwhile, crude production rose to 10.9 MMbpd, topping 10 million every week since early February.
