Oil Holds Near $76 Ahead of OPEC+ Meeting on Supply Policy

Oct 4, 2021

(Bloomberg) Oil flipped between gains and losses ahead of an OPEC+ meeting on Monday to discuss production policy amid a rapidly tightening market.Futures in New York were little changed and remain near $76. The Organization of Petroleum Exporting Countries and its allies are unlikely to add more than their planned volume of 400,000 barrel a day of output in November, according to Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects. OPEC+’s modeling is showing demand will outstrip supply over the next two months.

Oil capped sixth weekly gain as market tightens

The market has tightened significantly recently following a robust rebound in demand from economies recovering from the pandemic and supply disruption in the Gulf of Mexico due to Hurricane Ida. Surging natural gas prices ahead of winter have also raised the prospect of higher volumes of oil products being consumed in power generation, potentially boosting overall demand.

“I’m not saying they won’t add more than 400,000 barrels a day down the line, but for today we think that’s unlikely,” Energy Aspects’ Sen said in an interview with Bloomberg Television. “Saudi Arabia is very, very keen to reduce volatility, both on the upside and the downside. That’s the key. If suddenly prices spiked, then they’ll be very quick to react.”

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Prices
West Texas Intermediate dipped 0.2% to $75.73 a barrel as of 10:16 a.m. in London Brent held steady at $79.21

OPEC+ production policy will be the main factor influencing oil prices over the coming months, according to Vitol Group. There’s little chance of Iranian barrels returning this year and U.S. shale producers aren’t investing enough to raise output quickly, Mike Muller, the head of Asia for the oil trading house, said on a Sunday webinar hosted by Dubai-based consultancy Gulf Intelligence.

Fuel switching due to high coal and gas prices is likely to push oil demand higher by 500,000 barrels a day this winter, Sri Paravaikkarasu, head of Asia oil at consultant FGE, said in a Bloomberg Television interview. A cold winter could see consumption climb by a further 200,000 to 300,000 barrels a day, she added.

Other market news:
Iran has told the U.S. it should release at least $10 billion of frozen Iranian funds if it wants Tehran to resume nuclear talks, a potential new snag in efforts to revive the 2015 atomic accord. The United Arab Emirates ports of Fujairah and Khor Fakkan are both operating normally as of midday Monday after Cyclone Shaheen reached land a day earlier, according to port officials. The move to deploy the British Army to deliver petrol only went part-way to reassuring motorists as the supply crisis gripping the U.K. extended into a second week.

Other market news:

Iran has told the U.S. it should release at least $10 billion of frozen Iranian funds if it wants Tehran to resume nuclear talks, a potential new snag in efforts to revive the 2015 atomic accord.
The United Arab Emirates ports of Fujairah and Khor Fakkan are both operating normally as of midday Monday after Cyclone Shaheen reached land a day earlier, according to port officials.
The move to deploy the British Army to deliver petrol only went part-way to reassuring motorists as the supply crisis gripping the U.K. extended into a second week.