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Oil wobbles near $66 as OPEC's mixed views deepen supply dilemma

Jun 08 2018 09:44
Heesu Lee, Bloomberg

Oil traded below $66 a barrel as conflicting signals from OPEC members about whether their output curbs will be relaxed spurred speculation that an agreement will prove elusive at an upcoming group meeting.

Futures were little changed in New York, after they flipped between gains and losses over the past four sessions. While Saudi Arabia and Russia have signaled they’re ready to boost output, Iraqi Oil Minister Jabbar al-Luaibi told Reuters that an increase won’t be on the table at the June 22 meeting in Vienna.

The US is said to have asked the group to raise supplies by about 1 million barrels a day, further raising the prospect of a contentious gathering.

The meeting may end in failure due to misaligned positions of member countries and the need of unanimity for any decision, according to Sanford C. Bernstein & Co.

Crude has rallied to the the highest level since November 2014 in late May but since then, it has receded about 8% on speculation that OPEC and its allies would ease output curbs at a time when US drillers continue pumping at a record pace.

“The views are so widely different among OPEC members that they’ll probably fail to reach an agreement at the meeting later this month,” Will Yun, a commodities analyst at Hyundai Futures, said by phone in Seoul. “Prices are likely to seesaw without any clear direction as uncertainties rise in the market.”

West Texas Intermediate for July delivery was at $65.62 a barrel on the New York Mercantile Exchange, down 33 cents, at 08:53. The contract is down 0.4% on the week, heading for a third weekly drop. The contract rose 1.9% to $65.95 on Thursday. Total volume traded was about 22% below the 100-day average.

Putin-prince meeting

Brent futures for August settlement were 52 cents lower at $76.80 a barrel on the London-based ICE Futures Europe exchange. Prices on Thursday gained $1.96 to $77.32. The global benchmark traded at a $11.26 premium to WTI for the same month.

Futures rose 0.7% to 468.9 yuan a barrel in the afternoon session on the Shanghai International Energy Exchange, after edging up 0.2% on Thursday.

With some members of the Organisation of Petroleum Exporting Countries resisting the Saudi-Russia proposal to ease output caps that have been in place since 2017, attention is also on a Moscow meeting between Russian President Vladimir Putin and Mohammed bin Salman, the powerful Saudi crown prince, at a World Cup soccer match on June 14. That’s only eight days before OPEC’s crucial Vienna gathering.

Saudi Arabia and Russia brokered a landmark deal in late 2016 to cut production to shrink a global glut, assembling a group of 24 nations from OPEC and outside the cartel. Putin has spoken on the phone with the Saudi king or the crown prince in the days before recent OPEC meetings to discuss what the Kremlin has called “fruitful coordination on world hydrocarbon markets.”

Trump complaint

The request from the US, which is not part of the supply deal, to raise output was made after US retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising prices.

It also follows Washington’s decision to reimpose sanctions on Iran, putting the OPEC member’s crude exports at risk at a time when fellow group producer Venezuela is struggling with an economic crisis.

Oil-market news:

• Venezuela wrote to fellow OPEC members urging them to unite against US sanctions, echoing a similar letter from Iran, according to people with knowledge of the matter.

• OPEC’s members all benefited from their supply deal, but the rewards weren’t evenly divided.

• The group’s overall oil-export revenues climbed by 28% in 2017 to $578bn, according to data released by it on Thursday.

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commodities  |  markets  |  oil
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