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Oil Slips With Planned OPEC+ Talks Stymied by Iraq Obstacle


By Elizabeth Low and Alex Longley

(Bloomberg) Oil declined as OPEC+ unity was threatened by a long-running feud over compliance with production cutbacks.Futures in New York fell 1.6% with OPEC+ still not confirming a date for its June meeting amid wrangling over Iraq’s commitment to cuts. Saudi Arabia and Russia have reached a preliminary deal to extend output curbs for an extra month, but the compliance of laggards has become a sticking point.

Futures earlier slumped 2.4%, but pared losses as the European Central Bank boosted stimulus measures.

Oil rally running into headwinds in June

While oil prices have rebounded rapidly since mid-April, the rally is faltering amid gathering headwinds. The White House is suspending passenger flights to the U.S. by Chinese airlines as relations between the two leading economies deteriorate, while civil unrest across America is complicating the economic recovery from the coronavirus and risking a second wave of infections.

Sluggish Demand

U.S. diesel demand fell to a 21-year low last week and gasoline stockpiles swelled, according to Energy Information Administration data. The figures suggest that fuel consumption in the world’s largest oil consumer isn’t recovering as quickly as previously anticipated, and other countries continue to see demand languishing.

“There is still a huge surplus, demand is not back to where it was before,” Norwegian Energy Minister Tina Bru said in a Bloomberg Television interview. Nevertheless, “we’re seeing good signs in the market that it’s moving toward a stabilization a little quicker than the worst fears.”

Prices:
  • West Texas Intermediate for July delivery dropped 1.6% to $36.70 a barrel as of 8:55 a.m. in New York, after rising 1.3% on Wednesday.
  • Brent for August settlement declined 1.1% to $39.37 a barrel.

The timing for a meeting between the Organization of Petroleum Exporting Countries and its allies, planned for this week or next, remains unclear as disagreements between members persist. Amid the uncertainty, Saudi Arabia has delayed its July crude pricing until Sunday at the earliest, according to people with knowledge of the situation.

“It’s not an easy exercise for OPEC to balance the market,” said Olivier Jakob, managing director of consultants Petromatrix GmbH. The Saudis likely realize “they need to be careful about not helping the U.S. crude oil to come back too quickly.”

Higher prices have already spurred some U.S. producers to bring wells back online. EOG Resources Inc. and Parsley Energy Inc. are preparing to ramp up output just weeks after turning off the taps.

More oil-market news
  • Russia, OPEC’s most important ally in the production-cuts deal, sees a potential deficit in the global oil market of 3 million to 5 million barrels a day in July, Interfax reported, citing Energy Minister Alexander Novak.
  • Oil traders and analysts scrutinizing U.S. inventory data for signs of a market recovery are being confronted by an odd situation: the math just doesn’t add up.
  • Oil-output cuts by OPEC and other producers — including Norway for the first time in almost two decades — are helping to stabilize the market, the Nordic country’s petroleum minister said.


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