X

This is not a paywall.

Register for free to continue reading.

The news sucks. But your reading experience doesn't have to. Help us improve that for you by registering for free.



Please create a password or click to receive a login link.


Please enter your password or get a login link if you’ve forgotten


Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Oil set for sixth weekly gain as OPEC+ supply boost dis...

Business Maverick

Business Maverick

Oil set for sixth weekly gain as OPEC+ supply boost disappoints

An oil pump jack in Midland, Texas, US, on Thursday, April 7, 2022. Midland, Texas, is used to booms and busts. But even here, prices are shocking the local economy — and the Fed may not be able to help. Photographer: Sergio Flores/Bloomberg
By Bloomberg
03 Jun 2022 0

Oil headed for a sixth weekly advance after a keenly anticipated OPEC+ meeting delivered only a modest increase in output that failed to assuage concerns over a widening supply deficit. 

The producer cartel agreed to a hike that amounts to just 0.4% of global demand over July and August. There had been speculation the Saudis were preparing to pump significantly more as part of a reset of relations with the US, and there were even suggestions that Russia might be exempted from the alliance’s monthly supply agreements.

See also: Saudis Nod to US With Oil-Output Hike, But Keep Russia Close 

That didn’t happen, with West Texas Intermediate closing up 1.4% after the decision and trading near $117 a barrel in Asia on Friday. A six-month long rally in the US benchmark — the longest such run in more than a decade — now looks set to continue. A report showing American crude stockpiles falling more than twice as much as expected last week at the start of the summer driving season highlighted the growing supply deficit.

OPEC+ agreed to production hikes of 648,000 barrels a day for July and August, about 50% larger than the increases seen in recent months. The decision came after the European Union approved a partial ban on Russian oil imports and after months of pressure by Washington on Saudi Arabia. There were doubts the group would be able to fully deliver on the pledged increases, given they will be spread across its members, many of whom have struggled to raise output. 

The decision by OPEC+ could, in practice, mean 132,000 barrels a day each month of actual additional output from Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, Citigroup Inc. said in a note. Prices have been marching higher in the past week as markets assessed the EU move, Chinese lockdowns were lifted and the US summer driving season got underway, it said.

“The agreed supply increases look big on paper, but in reality it is very unlikely the group will manage to hit these production targets,” said Warren Patterson, head of commodities strategy for ING Groep NV based in Singapore. “Russian output is likely to edge lower in the months ahead as sanctions bite, while there’s limited spare capacity among other members.”

ING’s forecast for Brent to average $122 a barrel over the second half remains unchanged, he said.

Prices
  • WTI for July delivery declined 0.2% to $116.68 a barrel as of 11 a.m. Singapore time.
    • Futures are up 1.4% this week.
  • Brent fell 0.2% to $117.51 after climbing 1.1% on Thursday.
  • Gasoline rose 0.9% to $4.22 a gallon in New York after hitting a record earlier.

Oil has been driven higher this year on rebounding demand as countries threw off virus restrictions, while Russia’s invasion of Ukraine has reduced supply from one of the world’s three-biggest producers. A potential resurgence in consumption in China, the world’s biggest crude importer, is now threatening to add even more upward pressure to prices.

The ramp up in OPEC+ supply wouldn’t be enough to balance a market that’s shifting into deficit due to the demand recovery in China, Goldman Sachs Group Inc. said in a note. The bank said its expectations for output from the alliance are skewed to the downside, given the European ban on Russian imports and a lack of progress on negotiations with Iran. It reiterated its forecast for Brent to average $125 a barrel in the second half.

Play Video

The OPEC+ announcement also didn’t have much impact on oil’s market structure. Brent’s prompt timespread was $2.62 a barrel in backwardation — a bullish pattern where near term prices are higher than those further out — compared with $2.73 at the close on Wednesday.

US crude stockpiles fell around 5.1 million barrels last week, more than the median estimate for a decline of 2.1 million barrels, according to an Energy Information Administration report Thursday. New York-area gasoline stockpiles dropped to the lowest level since 2017.

 

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted