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Oil Set for Best Week Since June as Saudi Arabia Talks Tough

The CITGO Petroleum Corp. Lake Charles Refinery ahead of Hurricane Laura in Lake Charles, Louisiana, U.S., on Wednesday, Aug. 26, 2020. Hurricane Laura is poised to become a Category 4 storm that could wreak catastrophic damage in Texas and Louisiana, bringing a life-threatening storm surge, flash flooding and destructive winds that could leave areas uninhabitable for weeks or months. Photographer: Bryan Tarnowski/Bloomberg

Oil is on track for its strongest week since June, boosted by shrinking U.S. stockpiles and after Saudi Arabia ratcheted up the pressure on OPEC+ members to adhere to their production quotas.

 Saudi Arabia’s Prince Abdulaziz bin Salman used Thursday’s OPEC+ Joint Ministerial Monitoring Committee meeting to lambast cartel members that have cheated on production quotas. He was backed by Russia’s Energy Minister Alexander Novak, who said the group should continue to strive for high compliance.

Prince Abdulaziz also warned short sellers not to challenge the kingdom’s resolve to support the market. His comments added momentum to this week’s rally, with U.S. crude up almost 10% over the week.

“I want the guys in the trading floors to be as jumpy as possible,” he said. “I’m going to make sure whoever gambles on this market will be ouching like hell.”

U.S. crude on track for strongest weekly gain since June
Prices
  • West Texas Intermediate for October delivery dipped 2 cents to $40.95 a barrel on the New York Mercantile Exchange at 8:11 a.m. Sydney time.
    • October WTI rose 81 cents to settle Thursday at $40.97 a barrel. The contract settled above its 200-day moving average, a key technical level above which it has struggled to sustain a rally
  • Brent for November settlement advanced $1.08 cents to end the session at $43.30 a barrel, its highest since Sept. 3. The global crude benchmark saw its largest three-day rally since early June.

This week, the United Arab Emirates signaled that it would make up for pumping too much oil in the past two months, but others are dragging their heels. Iraq is exporting more crude so far in September than it shipped last month, a sign that the country is falling further behind in efforts to comply with its OPEC+ production limit.

Meanwhile, a consumption recovery remains a challenge for oil markets. During the OPEC+ meeting, the group said it sees risk to demand from a second wave of the Covid-19 pandemic and urged members to be proactive and ready to take further action.

The market got a boost on Wednesday from U.S. government data that showed a surprise draw in crude stockpiles last week. However, a slight rebound over the summer in gasoline demand has stalled with the equivalent of a million full-sized pickup trucks off the road as the virus forces Americans to stay at home.

Physical markets for actual barrels of crude are showing signs of weakness, with Bakken crude for delivery at Clearbrook, Minnesota, trading in recent sessions at its largest discount to Nymex oil futures in roughly a week. Poseidon crude erased its premium against Nymex WTI futures, trading at its weakest level in about two months.

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