OPEC+ supply is deadlocked, U.S. dollar falls, oil prices rise Coronavirus pandemic news


Due to the recent supply uncertainty, crude oil will record its first weekly decline since May.

After a week of volatile trading, due to the weakness of the U.S. dollar and strong fuel demand during the summer driving peak in the United States boosted commodities, oil prices rose.

Futures rose 2.4% on Friday, rising in tandem with other commodities. The weaker U.S. dollar has boosted the attractiveness of commodities priced in that currency. This week, the US government report showed that crude oil inventories fell for the seventh consecutive time. Gasoline demand hit a record one week before the July 4 holiday weekend, and oil prices rose.

Nevertheless, due to the recent supply uncertainty, crude oil will still record its first weekly decline since May. The Organization of Petroleum Exporting Countries and its partners failed to reach an agreement to increase production in August and the following months.

“The market will continue to oscillate within a range,” said Michael Tran, a capital market analyst at Royal Bank of Canada. “Ultimately, the market hopes to go higher, but considering some recent unfavorable factors, especially in terms of policy, I think the market is taking a breather.”

Due to increased fuel consumption in countries such as the United States, India, and China, oil prices have risen. With crude oil inventories dwindling and U.S. refineries operating near full capacity to keep up with demand, Americans are enthusiastically on the road during the national tourist season.

Tran said: “We are now in a seemingly extremely strong summer. Fundamentally speaking, the U.S. stock market has fallen sharply, and we expect this to continue to support the market.”

At the same time, the OPEC+ alliance and US shale oil producers have taken disciplinary actions against restoring supplies that were shelved during the pandemic. Citi analysts said that by the third quarter of this year, the global oil market will still be in a “severe shortage” of more than 3 million barrels per day. According to the report, OPEC+ countries “sooner or later” need to add more oil to the market at a higher level.

Before talks broke down on Monday, Saudi Arabia proposed that the alliance gradually restore production capacity of 5.8 million barrels per day, increasing it by 400,000 barrels in monthly installments until the end of next year. However, the United Arab Emirates blocked an agreement, saying that it would only support extending the agreement if it changed its quota, which the country considered obsolete.

Stephen Brennock, an analyst at PVM Oil Associates Ltd, said: “This widening gap between supply and demand puts the oil market at risk of over-tightening and should provide OPEC+ leadership with sufficient motivation to resolve their disputes. .” “Or you would think so.”

If no agreement is reached, the existing agreement indicates that production will remain stable next month. The unresolved deadlock may also completely break the alliance and trigger a new price war.

price:

  • At 10:57 am New York time, the price of WTI crude oil for delivery in August rose by US$1.72 to US$74.66 per barrel.
  • Prices have fallen by 0.7% this week.
  • The price of Brent crude oil for September settlement on the ICE European Futures Exchange rose by US$1.46 to US$75.58 per barrel.

At the same time, after six rounds of negotiations failed to reach an agreement, the administration of President Joe Biden began to work hard to deal with the possibility that the Iran nuclear agreement could not be restored. This means that global oil supply will remain tight, because the most severe restriction on the country is still an effective prohibition on the legal sale of oil abroad.

Traders are also paying attention to the global spread of delta variants, which have taken root in countries with low vaccination rates (especially Asia). New liquidity restrictions threaten the recovery of oil demand.

Thailand has ordered more stringent measures to curb the surge in new cases, while South Korea has increased the social distancing restrictions in Seoul to the highest level for two weeks starting from Monday.

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