Oil slips as Opec deal looks set to boost supplies

Singapore — Oil prices fell nearly 1% on Thursday, extending losses as investors braced for more supplies following a compromise between top producers of oil cartel Opec and as US fuel stocks rose, raising concerns about demand in the world’s largest consumer.

Brent crude futures for September dropped 59 US cents, or 0.8%, to $74.17 a barrel by 4.09am GMT, while US West Texas Intermediate (WTI) crude for August was at $72.51 a barrel, down 62c, or 0.9%.

Both benchmarks slid more than 2% on Wednesday after Reuters reported that Saudi Arabia and the United Arab Emirates (UAE) reached a compromise that should pave the way for a deal to supply more crude to a tight oil market and cool soaring prices.

“The market is not taking any chances. Prices are very overbought anyway so traders might want to take some money off the table before the deal is concrete,” said Avtar Sandu, senior commodity trader at Phillips Futures in Singapore.

Talks among Opec and its allies including Russia, a group known as Opec+, had broken down earlier in July after the UAE objected to extending the supply cut deal beyond April 2022.

“The deal will take some time to get finalised, but it seems the UAE will be allowed to produce more output next year,” Oanda analyst Edward Moya said in a note.

“It seems Opec+ will shortly have a plan to raise output and that is welcomed news as surging demand had oil market getting too tight.”

In the US, crude stockpiles fell for an eighth straight week last week, but petrol and diesel inventories rose despite a drop in refinery utilisation rates, data from the Energy Information Administration showed on Wednesday.

The large drawdown in crude stocks did little to boost oil prices as traders focused on the first rise in total petroleum stocks since early June, Moya said.

However, China, the world’s top crude importer, on Thursday reported record crude processing volumes at its refineries in June, easing some of the downward pressure on oil prices.

Elsewhere, the prospect of a quick return of Iranian supplies to global markets has been pushed back as negotiations over the revival of the 2015 nuclear deal will not resume until mid-August. 

Reuters