Oil prices slip below $75 as OPEC considers crude output hike
(Bloomberg) --Oil retreated after hitting $75 a barrel in London for the first time in more than two years, as Russia and other OPEC+ nations were said to consider increasing production.
Brent crude edged above $75 in Asian trading hours as price indicators and inventory data showed that demand still outstrips supply. The gains faltered as Russia -- which jointly leads the OPEC+ coalition with Saudi Arabia -- was said to mull a proposal that the group continue to revive halted output in August.
The Organization of Petroleum Exporting Countries and its partners have been gradually restoring supplies shuttered during the pandemic, and will gather on July 1 to weigh another hike. While Saudi Arabia has signaled it prefers to maintain a cautious stance, the roaring comeback in demand is putting pressure on the kingdom to open the taps.
“The market is hungry for oil,” Saad Rahim, Trafigura Group’s global chief economist, said Tuesday in an interview with Bloomberg Television. Prices could top $100 a barrel in the next 12 to 18 months, he said.
Brent has rallied more than 40% this year as a strong rebound from the pandemic in the U.S., China and Europe underpins higher fuel consumption, although fresh virus waves in parts of Asia are a reminder that the recovery will be uneven. Brent is also the most expensive against Middle Eastern oil in 21 months.
Other market gauges reflect growing strength, with one timespread for West Texas Intermediate expanding to the widest backwardation in seven years. Genscape Inc. reported stockpiles at the key American storage hub of Cushing fell again last week from the lowest level since March 2020, according to people familiar with the matter.
Prices:
- Brent for August settlement fell 21 cents to $74.69 on the ICE Futures Europe exchange at 1:49 p.m. local time, after reaching the highest intraday level since April 2019.
- The prompt timespread for Brent was 77 cents in backwardation, compared with 57 cents at the start of last week.
- WTI for July delivery, which expires Tuesday, was down 33 cents at $73.33 a barrel on the New York Mercantile Exchange.
- The more-active August contract dropped 30 cents to $72.82.
One bit of bearish news amid all the optimism is China’s crackdown on the nation’s private refiners. A second batch of 2021 crude import quotas allocated to the independents was about 35% less than last year, which will crimp flows into a sector that accounts for around a quarter of Chinese processing capacity.
Other market news:
- Exxon Mobil Corp. is preparing to reduce headcount at its U.S. offices by 5% to 10% annually for the next three to five years by using its performance-evaluation system to suss out low performers, according to people familiar with the matter.
- A key oil refinery for U.S. East Coast consumers is halting operations after escalating environmental scrutiny made it impossible for backers to obtain desperately needed financing.
