Oil Climbs as OPEC Producers Discuss Size of Output Increase
(Bloomberg) -- Crude climbed as traders weigh signals from OPEC producers on the potential size of an output increase.
West Texas Intermediate crude futures advanced 1.2 percent. OPEC members are considering a compromise that would boost output between 300,000 and 600,000 barrels a day over the next few months, according to people briefed on the talks. That’s less than the increase proposed by Russia and Saudi Arabia, which, according to Ecuador’s hydrocarbons minister, is for 1.5 million barrels. Producers will meet in Vienna this week.
“That would be a bullish development if you’re going to have a number that’s closer to 300,000 than 1.5 million,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “OPEC headlines are going to be a bit more sensitive for the international benchmark than they are for WTI.”
Crude has dropped about 1.8 percent so far this month in New York amid threats of OPEC easing its production limits that have been in place since early 2017. Iran, Venezuela and Iraq have expressed resistance to the idea, and traders are awaiting any potential formal decisions by the producer group later this week.
WTI for July delivery rose 79 cents to settle at $65.85 a barrel on the New York Mercantile Exchange. Total volume traded was about 11 percent below the 100-day average.
Brent futures for August settlement added $1.90 to end the session at $75.34 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.65 premium to WTI for the same month.
OPEC officials are also working on putting the cooperation between the cartel, Russia and other oil producers -- the so-called OPEC+ group currently comprising 24 nations -- on a permanent footing. That would be a major diplomatic breakthrough for Riyadh and Moscow after just two years of cooperation on oil policy.
Meanwhile, Tehran said it has Iraqi and Venezuelan support to veto any proposal for more output. “If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity,” Hossein Kazempour Ardebili, Iran’s OPEC representative, said on Sunday.
“Iran coming out and saying they are going to veto a production increase along with Venezuela and Iraq gave the market another reason not to be short,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. Oil prices are rising amid signals that “the loss of exports from Iran because of sanctions and the continuing decline in Venezuela oil production” will keep the impact of a potential OPEC output rise muted, he said.
Other oil-market news:
- Gasoline futures rose 1.6 percent to settle at $2.0546 a gallon.
- Saudi Arabia’s crude exports jumped in the first half of June, before the world’s largest oil exporter meets with other producer states to thrash out a collective production policy.
- U.S. crude inventories probably decreased 2.75 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.
- Cushing, Oklahoma crude stockpiles fell 450,000 barrels last week, according to a forecast compiled by Bloomberg.
- Investors removed $79.8 million from the U.S. Oil Fund last week, the largest weekly outflow since mid-April, data compiled by Bloomberg show.
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