Oil heads for weekly decline on Opec+ output standoff

Tokyo — Oil prices were mixed on Friday after a boost from a drop in US crude and petrol inventories, but were still set for a weekly decline on concerns that an Opec+ impasse could swell global crude supplies.

Brent crude oil futures were down 9c, or 0.1%, at $74.03 a barrel at 1.40am GMT. US West Texas Intermediate futures were up 1c at $72.95 a barrel.

Both benchmarks were headed for a loss of nearly 3% for the week, as traders remained worried that the collapse of talks between Opec and allies including Russia, a group known as Opec+, could lead to a rise in crude supplies.

“A large decline in the US stockpile reinforced views that fuel demand was growing as the US driving season has begun,” said Hiroyuki Kikukawa, GM of research at Nissan Securities.

“Since there has not been any major lift in the US shale output, some investors became bullish despite the Opec+ spat,” he said.

US crude and petrol stocks fell and petrol demand reached its highest since 2019, the US Energy Information Administration said on Thursday, signalling increasing strength in the US economy.

Crude inventories fell by 6.9-million barrels in the week to July 2 to 445.5-million barrels, the lowest since February 2020, and more than the expected 4-million barrel drop estimated in a Reuters poll. Petrol stocks fell by 6.1-million barrels, exceeding expectations for a 2.2-million barrel drop.

Even with oil prices rising towards $75 a barrel, US shale producers are keeping their pledges to hold the line on spending and keep output flat, a departure from previous boom cycles.

Still, some traders feared members of the Opec+ group could be tempted to abandon output limits that they have followed during the pandemic due to the breakdown in discussions between major oil producers Saudi Arabia and the United Arab Emirates (UAE).

The two Gulf Opec allies are at odds over a proposed deal that would have brought more oil to the market.

Russia was trying to mediate to help strike a deal to raise output, Opec+ sources said on Wednesday. The US had high level conversations with officials in Saudi Arabia and the UAE, the White House said on Tuesday.

Reuters