Oil prices up about 2% on OPEC+ output, demand prospects
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[July 03, 2021] By
Laila Kearney
NEW YORK (Reuters) -Oil prices rose roughly
2% on Thursday on indications that OPEC+ producers could increase output
more slowly than expected in coming months, while rising global fuel
demand causes supply to tighten.
Brent crude settled at $75.84 a barrel, up $1.22, or 1.6%. U.S. West
Texas Intermediate crude settled at $75.23 a barrel, gaining $1.76, or
2.4%.
During the session, both benchmarks climbed by more than $2 a barrel,
reaching their highest since October 2018.
Futures pared gains after the Organization of the Petroleum Exporting
Countries and allies, known as OPEC+, delayed its ministerial meeting
until Friday to hold more talks on oil output policy, sources said,
after the United Arab Emirates blocked a plan for an immediate reduction
in supply cuts.
"Such a delay in talks is unusual and would appear to indicate some
significant discord within the organization between participants," said
Jim Ritterbusch of Ritterbusch and Associates.
OPEC+ sources said earlier that the group was expected to increase
output by 0.4 million barrels per day a month from August to December
2021.
"I firmly believe that in the near-term, OPEC+, led by Saudi Arabia, is
looking to squeeze consuming countries and engender a higher price to
make up for the damage done last year," said John Kilduff, partner at
Again Capital in New York.
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An oil storage
tank and crude oil pipeline
equipment is seen during a tour by the Department of Energy at the
Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016.
REUTERS/Richard Carson/File Photo
Some market participants remained skeptical of the demand projection.
"Everybody is drinking the OPEC Kool-Aid here and buying the story that
demand is going to increase by 5 million barrels in the second half of
the year," said Bob Yawger, director of energy futures, at Mizuho
Securities.
Yawger said OPEC's demand forecast does not account for the possibility
of increased supply from Iran, spread of the COVID-19 Delta variant and
lackluster seasonal U.S. gasoline use.
There have been several outbreaks of the Delta variant of the
coronavirus, raising concerns that the recovery will falter.
(Additional reporting by Bozorgmehr Sharafedin in London, Noah Browning
in London and Florence Tan in SingaporeEditing by David Goodman, Mark
Potter and David Gregorio)
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