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Oil Steadies Near Seven-Year High as OPEC+ Sticks to Ou...

Business Maverick

Business Maverick

Oil Steadies Near Seven-Year High as OPEC+ Sticks to Output Plan

An oil flare burns at the Royal Dutch Shell Norco Refinery during a power outage caused by Hurricane Ida in LaPlace, Louisiana, U.S., on Monday, Aug. 30, 2021. Hurricane Ida barreled into the Louisiana coast on Sunday, packing winds more powerful than Hurricane Katrina and a devastating storm surge that threatens to inundate New Orleans with mass flooding, power outages and destruction. Photographer: Luke Sharrett/Bloomberg
By Bloomberg
05 Oct 2021 0

Oil steadied in Asian trading after rallying to the highest level since 2014 following a decision by OPEC+ to maintain its planned gradual increase of supply, despite the market facing an energy crunch.

Futures in New York traded near $78 a barrel after surging 2.3% on Monday as the alliance stuck with a 400,000 barrel-a-day boost for November. Some market watchers were expecting the group, led by Saudi Arabia and Russia, to increase production by more than planned due to a spike in natural gas prices that’s led to greater demand for crude and oil products ahead of winter.
Oil surged after OPEC+ stuck with its planned supply increase

Crude markets have tightened as economies rebounded from the pandemic, and modeling from OPEC is predicting a supply deficit over the next two months. Goldman Sachs Group Inc. sees an extra 650,000 barrels a day of demand later this year as utilities wrestling with high natural gas prices switch to oil, while Saudi Aramco said the gas crisis was already boosting crude consumption.

“Prices are likely to remain supported in the final quarter, with gas-to-oil switching and pricey coal adding to oil consumption,” said Will Sungchil Yun, senior commodities analyst at VI Investment Corp.

Prices
  • West Texas Intermediate for November delivery was little changed at $77.57 a barrel on the New York Mercantile Exchange at 9:04 a.m. in Singapore after closing at the highest since November 2014.
  • Brent for December settlement was steady at $81.29 on the ICE Futures Europe exchange after rising 2.5% on Monday to close at the highest level since October 2018.

The prompt timespread for Brent was 80 cents a barrel in backwardation — a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 74 cents a week earlier.

See also: OPEC May Add More Supply in Wake of Gas Crisis, Citigroup Says

The OPEC+ decision “will allow us to continue normalize the market situation,” Russian Deputy Prime Minister Alexander Novak said during a speech at the meeting, part of which was broadcast by Rossiya 24 state TV channel. Ministers will meet again to discuss production policy on Nov. 4.

Other market news:
  • Royal Dutch Shell Plc resumed production at one of its main U.S. Gulf of Mexico offshore facilities supplying Mars sour crude to southern refineries.
  • The operator of 400 petrol stations in the U.K. stopped limiting how much gasoline and diesel people can buy, a sign that the nation’s 12-day fuel crisis is starting to ease.
  • The owner of a pipeline at the heart of California’s worst oil spill in almost 30 years is investigating the disaster site with a remotely controlled device and local authorities warned the cleanup may take weeks.
Gallery

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