Oil Market: OPEC+ Expected to Stick with July Output Boost - Bloomberg

Oil edged higher in Asian trading with the market focused on an OPEC+ supply policy meeting early this week and any commentary around the prospect for returning Iranian supply.

Futures in New York rose toward $67 a barrel after falling 0.8% on Friday. OPEC and its allies are expected to stick with a decision to boost output in July when the group gathers Tuesday, according to a Bloomberg survey last week. While rebounding demand is driving prices higher, the possibility of more barrels from Iran should a nuclear deal be revived is clouding the outlook.

Iran and world powers have resumed discussions, Russia’s envoy to the United Nations in Vienna said in a tweet, adding that there was an understanding among the countries involved that “the current round should be final.”

Oil is poised for a second straight monthly gain as the U.S., China and parts of Europe lead a robust demand recovery from the Covid-19 pandemic, despite a virus comeback across Asia. American gasoline stockpiles have declined and consumption gained in the lead up to the Memorial Day weekend, which heralds the start of the summer driving season and peak fuel demand.

“The best course of action for the alliance tomorrow may be to stay on an even keel, maintaining the current pace of tapering,” said Vandana Hari, founder of oil consultancy Vanda Insights. “The latest waves driven by virus variants and a slow pace of vaccinations suggests it will be a very gradual exit from the pandemic through the second half.”

Prices
West Texas Intermediate for July delivery gained 0.4% to $66.57 a barrel on the New York Mercantile Exchange at 9:42 a.m. Singapore time after advancing 4.3% last week. Futures are up 4.7% this month. Brent for August settlement rose 0.3% to $68.89 on the ICE Futures Europe exchange after losing 0.7% in the previous session.

The prompt timespread for Brent was 38 cents a barrel in backwardation -- a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 9 cents a week earlier.

See also: Last Week Was When the World Changed for Big Oil: Julian Lee

When OPEC+ meets on Tuesday, investors will also be looking for any clues on the next stage of the group’s supply policy amid growing expectations for demand to accelerate through the end of the year. As for July, all but four of 24 analysts and traders surveyed by Bloomberg predicted the alliance would ratify a planned increase of 840,000 barrels a day.

A gauge of China’s manufacturing industry slipped in May, meanwhile, adding to concerns that the recovery momentum in manufacturing might be peaking. The services and construction sectors strengthened. Indian data later Monday is forecast to show the nation’s gross domestic product during the first quarter posted a slight pickup in growth year-on-year.

Other market news:

Iran started its first transfer of crude oil via its strategic Goreh-Jask pipeline, allowing the country to bypass the Strait of Hormuz, the state-run Islamic Republic News Agency reported. Total SE shareholders gave broad endorsement to Chief Executive Officer Patrick Pouyanne’s plan to reduce carbon emissions by gradually scaling back oil-product sales in favor of renewables and liquefied natural gas.

— With assistance by Keith Gosman

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