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Oil Near $42 Ahead of OPEC+ Review of Easing Output Curbs


By Alex Longley

(Bloomberg) Oil fell below $42 a barrel in New York at the start of a week that will see OPEC+ gather to assess its supply deal as countries struggle to contain the virus that’s hurt economies and fuel demand globally.The Joint Ministerial Monitoring Committee — the panel which reviews the deal between the Organization of Petroleum Exporting Countries and its allies– is poised for a planned meeting on Wednesday, with the group starting to return some crude supply to the market this month following deep reductions.

OPEC+ will meet as pockets of the market have started to weaken in recent weeks. Futures for the Middle East’s Dubai benchmark are trading lower now than for future months, known as contango, which indicates oversupply. For the global Brent benchmark, that structure was the weakest since May.

Brent's nearest timespread is at its weakest since May

Oil has largely held above $40 in recent weeks as weakness in the dollar has helped support headline prices. However, the market is still facing headwinds including rising virus infections and fraying U.S.-China tensions, which may derail a nascent demand recovery. On Friday, the U.S. seized four tankers carrying Iranian gasoline bound for Venezuela in an unprecedented move that carries the potential to destabilize global oil shipments if Iran retaliates.

OPEC+ will seek “to keep compliance high,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Now is most certainly not the time to talk about bringing more barrels back to the market.”

Prices
  • West Texas Intermediate for September delivery fell 0.3% to $41.90 a barrel as of 10:41 a.m. London time
  • Brent for October settlement fell 0.4% to $44.61

OPEC+ is planning to return about 1.5 million barrels a day this month after trimming roughly 10% of global supply following a crash in demand due to the pandemic. Oil exports from alliance member Oman fell 14% in July from a month earlier, according to a statement from the Ministry of Oil & Gas. Iraq has also made its strongest commitment yet to implement deep output cuts.

“Between OPEC+ production cuts and reduced U.S. output, the crude market is broadly balanced,” the GZC Strategic Commodities Fund wrote in a note to clients. “Main risks remain to us that OPEC+ switches to a market share strategy, rather than a price management one”

Other oil-market news:
  • flotilla of tankers plying the waters between China and South Korea has been hauling unusually large volumes of a lesser-known fuel called light-cycle oil to Asia’s biggest crude consumer.
  • The downfall of storied Singapore oil trader Lim Oon Kuin reached a new nadir Friday, with the founder of Hin Leong (Pte) Ltd. charged with abatement of forgery for the purpose of cheating, punishable by up to 10 years in prison.
  • Four tankers seized by the U.S. while en route to Venezuela were carrying cargoes of gasoline loaded in Iran, Iranian Oil Minister Bijan Namdar Zanganeh said.


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