Oil fell this week for the first time since May after days of volatile trading in the wake of OPEC+’s stalemate over a production increase in the near term.
Futures in New York declined 0.9 percent this week, although the US crude benchmark closed higher on Friday amid a broader market rebound.
Prices whipsawed this week amid ambiguity over the future of the OPEC+ alliance and swings in the US dollar. A stronger dollar makes commodities priced in the currency less attractive to investors.
Photo: Reuters
West Texas Intermediate crude for August delivery on Friday rose 2.2 percent to US$74.56 a barrel, down 0.9 percent weekly.
Brent crude for August delivery on Friday rose 1.9 percent to US$75.55 a barrel, down 0.8 percent for the week.
“Nobody really knows how the supply growth is going to project from here,” said Peter McNally, global head of industrials, materials and energy at Third Bridge. “The world needs more oil and was expecting more oil, so while there’s this uncertainty around supply, demand keeps growing.”
Oil accelerated to a six-year high earlier this week after OPEC+ failed to ratify a production increase, spurring concerns of a supply shortfall.
Fuel consumption is rising in countries such as the US, India and China during the summer driving season.
Americans have hit the road with gusto, leading to rapidly draining inventories and US refineries running close to full-bore to keep up with demand.
“We’re now in the middle of what appears to be an extremely robust summer and the US seeing very large stock draws, fundamentally, that we anticipate will continue to support the market,” RBC Capital Markets analyst Michael Tran said.
At the same time, the OPEC+ alliance and US shale producers have practiced discipline toward returning supply that was shelved during the pandemic.
The global oil market would remain in “deep deficit” of more than 3 million barrels per day through the third quarter of this year, Citigroup analysts have said.
OPEC+ countries will need to add more oil to the market at a higher level “sooner or later,” the report said.
Before talks broke down earlier this week, Saudi Arabia proposed that the coalition gradually revive 5.8 million barrels of daily capacity in monthly installments of 400,000 barrels through to the end of next year.
However, the United Arab Emirates blocked an agreement, saying that it will only support an extension of the pact if there are revisions to its own quota, which the country contends is outdated.
If no agreement is reached, the existing one states that output will remain steady next month. The unresolved deadlock also threatens to unravel the alliance altogether and spark a fresh price war.
Additional reporting by staff writer
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