Oil Edges Up With Focus on Upcoming OPEC+ Production Meeting
(Bloomberg) -- Oil eked out a small gain in a choppy trading session with traders awaiting upcoming deliberations among OPEC+ producers that may lead to a supply hike.
U.S. crude futures closed 0.3% higher after switching between small gains and losses on Thursday. Oil’s recent advance pushed the commodity into overbought territory earlier this week, signaling the rally may fade. When it meets next week, the producer alliance led by Saudi Arabia and Russia is widely expected to revive some more of its halted output, according to a Bloomberg survey.
Nothing on the demand side has really changed and OPEC+ will likely increase output gradually, said Stewart Glickman, energy equity analyst at CFRA Research. “Given how disciplined they’ve been so far, I don’t think it’s going to be a free-for-all at this point.”
Crude futures are up more than 50% so far this year amid support from an economic recovery in the U.S., Europe and China. Vaccination progress has boosted reopenings, driving fuel consumption higher, and pushing the global crude benchmark above $75 a barrel this week. Meanwhile, the OPEC+ alliance has restored roughly 40% of the almost 10 million barrels of daily production it shuttered when demand collapsed last year. Ministers will gather on July 1 to assess the next step.
India has once again urged OPEC and its allies to revive halted oil production as the world’s third-biggest consumer expressed “deep concern” over spiraling energy prices.
The summer travel season is well underway in the U.S. where government data this week showed rapidly depleting crude inventories. U.S. refiners are reaching for crude from as far as Asia to meet rising demand.
The U.S. is “proving to be a rare bright spot” for imports of jet kerosene, with shipments into key ports rising to pre-Covid levels, according to a Vortexa report this week.
However, uncertainty around increases in OPEC+ production form a risk for portfolio managers at the end of the quarter, according to Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC. Some may scale back positions to lock in returns in case prices dip after the meeting, he said.
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