Oil futures rose Tuesday, lifted as supply worries moved back into the spotlight.
Price action
-
West Texas Intermediate crude for August delivery
CL.1,
+0.95% CLQ22,
+0.95%
rose $1.16, or 1.1%, to $110.73 a barrel. -
August Brent crude
BRNQ22,
+1.23% ,
the global benchmark, jumped $1.37, or 1.2%, to $116.46 a barrel on the ICE Futures Europe. September Brent crude
BRN00,
+1.29% BRNU22,
+1.29% ,
the most actively traded contract, was up $1.40, or 1.3%, to $112.38 a barrel. -
Back on Nymex, July gasoline
RBN22,
-0.29%
lost 0.6% to $3.8161 a gallon, while July heating oil
HON22,
-2.14%
was off 3.2% at $4.0964 a gallon. -
July natural gas
NGN22,
+1.77%
rose 2% to $6.63 per million British thermal units ahead of the contract’s expiration at the end of the session. The soon-to-be front month August contract
NGQ22,
+1.83%
traded at $6.653, up 1.6%.
Market drivers
Crude found support after news reports said French President Emmanuel Macron was overheard Monday telling U.S. President Joe Biden on the sidelines of a Group of Seven summit in Germany that Saudi Arabia and the United Arab Emirates had little room to boost crude output in the near term.
Macron told Biden that he had been informed by Sheikh Mohammed bin Zayed al-Nahyan, the leader of the U.A.E, that the country was at maximum production capacity and that the Saudis can increase production by 150,000 barrels a day or slightly more, but “don’t have huge capacities before six months time.”
U.A.E.’s energy minister later clarified that the country was producing near maximum capacity based on its OPEC+ production-agreement baseline of 3.168 billion barrels a day, Reuters reported.
Saudi Arabia and the U.A.E. are the only countries in OPEC+ — made up of the Organization of the Petroleum Exporting Countries and their allies, including Russia — that have been seen as capable of significantly boosting production. OPEC+ ministers meet later this week, while Biden is set to travel to Saudi Arabia next month.
Read: Don’t expect any surprises from OPEC+, even as recession worries weigh on oil prices
Given very limited spare capacity, “we think Saudi Arabia will seek to be judicious about how it deploys its remaining barrels and will likely incrementally increase output rather than simply dumping all the barrels at once and risk losing control of the market,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.
“One plausible option might be for Saudi Arabia to compensate for the production underperformance of countries like Angola and Nigeria in order to stay within the broad framework of the agreement, which runs through the end of December. Given the importance that Prince Abdulaziz publicly attaches to group cohesion, we think the Saudi oil minister would seek to elicit support from the rest of OPEC for such an arrangement in order to avoid the unilateral action optics,” she said.
Meanwhile, Ecuador’s energy ministry had warned on Sunday that crude production could halt within 48 hours if road blocks and vandalization of oil facilities continued, news reports said.
And Libya’s National Oil Corp. on Monday said it was considering declaring a state of force majeure in the Gulf of Sirte region within 72 hours unless production and shipping is resumed.
With supplies in focus, traders await weekly data from the Energy Information Administration. The government agency had said the data due last week was delayed due to “systems issues.” However, it now plans to release its weekly report on U.S. petroleum supplies, covering the weeks ended June 17 and June 24, on Wednesday.
On average, analysts forecast a fall of 3.7 million barrels in crude supplies for the week ended June 17, along with increases of 500,000 for gasoline and 600,000 for distillates, according to a poll conducted by S&P Global Commodity Insights. For the week June 24, the poll showed expectations for declines of 500,000 barrels for crude, 875,000 barrels for gasoline and 525,000 for distillates.
