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Oil Steady While IEA Warns That OPEC+ Spat May Tighten Market


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(Bloomberg) Oil steadied near $74 a barrel in New York while the International Energy Agency warned that deadlock in OPEC+ may cause global markets to “tighten significantly.”

The Paris-based IEA said that crude traders are braced for a “deepening supply deficit” as the dispute between the United Arab Emirates and Saudi Arabia prevents OPEC+ from boosting supplies. Both countries have locked in stable crude output for next month even as demand rebounds.

“It’s a market that, unless they put more oil in, is very, very tight,” said Ed Morse, head of commodities research at Citigroup Inc.

Torn between OPEC+ spat and demand fears

See also: OPEC+ Will Miss Out on Highest Demand Month of 2021: Citigroup

Oil has rallied more than 50% this year as as the vaccine roll-out accelerates the demand recovery. Chinese refiners are stepping up imports, and futures curves show a premium for near-term deliveries — known as backwardation — that’s associated with tight supplies.

Prices
  • West Texas Intermediate for August traded at $74.37 a barrel on the New York Mercantile Exchange at 12:56 p.m. in London.
  • Brent for September settlement added 0.5% to $75.54 on the ICE Futures Europe exchange after losing 0.5% on Monday.
    • The prompt backwardation for Brent was 77 cents a barrel in backwardation, compared with 95 cents a week earlier.

Nonetheless, the demand rebound is imperiled by the swift spread of the virus’ delta variant, which is forcing restrictions on work and mobility as it spreads through a largely unvaccinated Southeast Asia.

Indonesia, Southeast Asia’s biggest economy, is being wracked by a particularly brutal wave of Covid-19, with movement curbed in the industrial heartland of Java and the tourist enclave of Bali. Malaysia is still in the midst of a nationwide lockdown, while Thailand has just stepped up restrictions. Cases in the U.S. have also soared, recording the biggest weekly jump since April 2020.

Other market news:
  • Penn Virginia Corp., the shale driller whose shares have more than doubled this year, agreed to purchase rival Lonestar Resources US Inc. just months after the target emerged from bankruptcy.
  • The Biden administration is preparing to release a blueprint for limiting sales of U.S. drilling rights that falls short of the outright ban sought by some environmentalists.
  • Food for thought for anyone hoping that the fight against climate change will all but end fossil fuel burning by the middle of this century: an oil tanker company is making the opposite calculation.


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