Oil Market Latest News: Oil Holds Steady Near $74 a Barrel - Bloomberg

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Oil fell the most in a week with the market expecting OPEC+ producers to increase supply at an upcoming meeting at a time when the delta variant is threatening to slow a recovery in demand.

Futures in New York closed 1.5% lower. The Organization of Petroleum Exporting Countries and its allies will meet Thursday, when they may decide to boost output by 500,000 to 1 million barrels a day in August, according to a RBC Capital Markets report. Meanwhile, the spread of the more infectious delta variant of the coronavirus is resulting in renewed lockdowns across parts of Asia and Australia.

The coalition “will answer the call to put more barrels on the market,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in the report. “This modest turn of the taps should be palatable to all the parties involved,” and will be “well-received” by the Biden White House, she added.

U.S. crude futures are up more than 10% so far this month with progress in Covid-19 vaccination campaigns and reopenings underpinning an ongoing global demand rebound. Whether it’s in the North Sea, the Cushing storage hub in Oklahoma, or the Middle East, futures and swaps in the world’s leading pricing locations are trading deep in a pattern called backwardation, showing how traders are willing to pay big premiums to secure physical barrels. Key benchmark crude timespreads eased somewhat Monday with exports at a major Norwegian oil field set to rise to a record.

Saudi Arabia has maintained discipline toward relinquishing supply back into the market. The 23-nation alliance has restored roughly 40% of the almost 10 million barrels of daily production it shuttered when demand collapsed last year at a tightly controlled pace to avoid outpacing demand growth.

Still, the path to recovery continues to be a jagged one and remains susceptible to viral outbreaks dampening demand. With the spread of the variant, “we believe OPEC+ should take an even more cautious approach, only raising production by 100,000 to 200,000 barrels per day, month-on-month in August,” said Louise Dickson, oil markets analyst at Rystad Energy, in a note.

Cases of the delta variant have surged across Europe and Asia in recent weeks, leading to new travel and movement restrictions. The U.K. on Monday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions to visitors from the U.K. At the same time, authorities are racing to contain outbreaks in Australia.

Prices
West Texas Intermediate for August delivery slid $1.14 to settle at $72.91 in New York Brent for August settlement lost $1.50 to end session at $74.68 a barrel

Meanwhile, the possibility of Iranian barrels returning to international markets was potentially complicated after U.S. forces conducted air strikes Sunday against Iran-backed militias in Iraq. The militias are responsible for attacks against American facilities in Iraq, the Defense Department said.

Other market news:

OPEC+ expects that global oil markets will remain in deficit this year if it keeps output steady, according to data that technical experts will review on Tuesday ahead of the coalition’s main meeting. Summer is the time of the year when refiners are apt to chase profits regardless of what supply and demand numbers tell them. Particularly this year, after more than 12 months of retreat and industry losses in the billions because of a pandemic that paralyzed economies, the need for urgency is plain. Some of Asia’s biggest export-focused oil refiners are looking at cutting processing rates as a Covid-19 comeback crimps demand in parts of the region, and as China and India flood the market with excess fuel.

— With assistance by Elizabeth Low, and Alex Longley

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Oil Market Latest News: Oil Holds Steady Near $74 a Barrel - Bloomberg
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