Oil futures fell Thursday, extending a slump that began in the previous session after data showed a rise in U.S. fuel supplies and after reports said the United Arab Emirates and Saudi Arabia reached a compromise that would allow a further relaxation of output curbs beginning next month.
West Texas Intermediate crude for August delivery CL00,
A meeting of OPEC and its allies — known as OPEC+ — ended earlier this month without an agreement on a proposed easing of output curbs after the U.A.E. insisted it should be allowed to raise the baseline dictating its output, putting it at odds with Saudi Arabia.
Crude fell sharply Wednesday after reports said the U.A.E. and Saudi Arabia had reached a compromise. The U.A.E., however, has said no deal has been reached with OPEC+ producers and that talks are ongoing and would need the support of other OPEC countries, according to various news reports.
“It is also unclear whether the UAE’s higher oil production would be set off against the planned increase in OPEC+ production, which would mean the other countries could raise their output by less, which they would hardly be willing to accept,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
“If not, the UAE’s increased output would be on top of the intended increase in OPEC+ production, which could ultimately lead to too much oil on the market,” he said.
Traders will be watching to see if OPEC+ calls a meeting to ratify the reported compromise, said Robert Yawger, executive director of energy futures at Mizuho Securities.
“All OPEC+ members will need to agree on the increase for it to become official OPEC+ policy. No meeting [means] no agreement,” he said.
Weekly data from the U.S. Energy Information Administration released Wednesday revealed that domestic crude supplies fell for an eighth week in a row, but implied demand for motor gasoline declined, leading to an increase in supplies of the fuel.
OPEC on Thursday forecast world oil demand to grow by 6 million barrels a day in 2021, unchanged from its June projection, with total demand expected to average 96.6 million barrels a day. In its monthly report,
OPEC said there are “solid expectations” for global economic growth in 2022, with improved containment of COVID-19, particularly in emerging and developing countries, expected to allow oil demand to return to pre-pandemic levels next year. World oil demand is seen up 3.3 million barrels a day year-over-year in 2022, for average demand of 99.86 million barrels a day. Demand is forecast to top the 100-million-barrel-a-day threshold in the second half of 2022.
OPEC shaved its 2021 forecast for non-OPEC liquids supply by 30,000 barrels a day, despite upward revisions to the U.S. and Canada, and now sees growth at 81,000 barrels a day for an average of 63.8 million barrels a day.
