Get 40% Off
💎 WSM is up +52.1% since our AI picked it in December! Unlock all premium stock picksUnlock now

Oil Gains With OPEC Compliance Overshadowing U.S. Demand Fears

Published 07/14/2020, 05:31 PM
Updated 07/14/2020, 09:09 PM
© Bloomberg. An employee turns a control valve on pipework beside a storage tank at an oil delivery point operated by Bashneft PAO in Sergeevka village, near Ufa, Russia, on Monday, Sept. 26, 2016. Bashneft distributes petroleum products and petrochemicals around the world and in Russia via filling stations. Photographer: Andrey Rudakov/Bloomberg

© Bloomberg. An employee turns a control valve on pipework beside a storage tank at an oil delivery point operated by Bashneft PAO in Sergeevka village, near Ufa, Russia, on Monday, Sept. 26, 2016. Bashneft distributes petroleum products and petrochemicals around the world and in Russia via filling stations. Photographer: Andrey Rudakov/Bloomberg

(Bloomberg) -- Crude futures rose as initial signs that OPEC members intend to comply with promises to curtail production eclipsed fears that a resurgence in coronavirus cases would send demand back to the worst days of the pandemic.

Saudi Arabia commended Iraq for implementing almost all its pledged oil-production cuts, and Nigeria told the kingdom it was committed to hitting its target, in further signs that disputes among OPEC+ members over cheating of quotas are being resolved.

“It’s all about risk appetite and the hope of continued demand growth here,” said Bart Melek, global head of commodity strategy at TD Securities. Iraq and Nigeria pledging to “to live up to their supply cut commitments made investors comfortable to take a long stance on oil.”

Oil has been stuck in a rut after staging a months-long rally from historic lows in April. A wave of new coronavirus cases sweeping the U.S. has spurred concerns over a recovery in gasoline demand.

“We’ve been in a market that’s been in clear consolidation for quite some time,” said Thomas Finlon of Houston-based GF International. “After a considerable rally or selloff, the interesting thing is the market seems to be drawn back to unchanged on the day pretty quickly.”

Figures from the American Petroleum Institute showed U.S. crude stockpiles decreased 8.32 million barrels last week, but supplies in Cushing, Oklahoma, rose 548,000 barrels. The market is turning its attention to Wednesday’s U.S. Energy Information Administration inventory report.

“If crude oil storage posts a new all-time record, with a build at Cushing thrown in for good measure, I would tend to think the market would trade lower… possibly sharply lower,” Bob Yawger, director of the futures division at Mizuho Securities USA, said in a note to clients.

In the longer-term, OPEC expects demand for its crude to rebound next year, surpassing levels seen before the pandemic, as rival producers struggle to revive output. An OPEC+ committee meets Wednesday to discuss easing record supply curbs that have helped the market recover. OPEC+ is expected to stick with plans to taper the cuts from August even as the virus rages in many parts of the world.

The OPEC+ committee will consider whether the alliance should keep 9.6 million barrels of daily output off the market for another month, or taper the cutback to 7.7 million barrels as originally planned. Members are leaning toward the latter option, according to several national delegates who asked not to be identified.

©2020 Bloomberg L.P.

© Bloomberg. An employee turns a control valve on pipework beside a storage tank at an oil delivery point operated by Bashneft PAO in Sergeevka village, near Ufa, Russia, on Monday, Sept. 26, 2016. Bashneft distributes petroleum products and petrochemicals around the world and in Russia via filling stations. Photographer: Andrey Rudakov/Bloomberg

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.