Oil prices fall as traders assess talks over Saudi Arabia and progress of UAE exit deal
Oil futures stabilized lower on Wednesday, under pressure from data showing declining demand for gasoline in the United States, as traders assessed speculation that Saudi Arabia and the UAE United Arabs had made progress towards a compromise on production levels.
A disagreement between the two nations had led to an abrupt end to talks by OPEC +, the Organization of the Petroleum Exporting Countries and their allies, earlier this month with no agreement on crude production levels.
Some reports said on Wednesday that the UAE and Saudi Arabia had reached a compromise, but the UAE said no deal had been reached with OPEC + producers and talks were underway. ongoing and would need the support of other OPEC countries, according to various reports.
Traders also analyzed weekly US oil supply data on Wednesday that was released an hour later than usual, with the Energy Information Administration citing a “technical glitch” for the delay. The data revealed that domestic crude supplies fell for an eighth straight week, but implied demand for motor gasoline declined, leading to increased fuel supplies.
West Texas Intermediate crude for delivery in August CL00,
fell $ 2.12, or 2.8%, to $ 73.13 a barrel on the New York Mercantile Exchange. September Brent gross BRN00,
the global benchmark, lost $ 1.73, or 2.3%, to $ 74.76 a barrel on ICE Futures Europe.
Saudi Arabia and the United Arab Emirates reached a compromise on Wednesday to increase the amount of oil the UAE can pump as part of a broader OPEC + deal, the Wall Street Journal reported on Wednesday, citing people close to the file.
OPEC + talks on a proposal to increase production by 400,000 barrels per day every month through the end of 2022 collapsed earlier this month after the UAE insisted its base benchmark is raised by around 3.16 million barrels per day. In the compromise that would have been reached with Saudi Arabia on Wednesday, the United Arab Emirates can increase that figure to 3.65 million barrels per day from April.
Some reports, however, said in a statement, the UAE’s Minister of Energy denied that an agreement had been reached with OPEC +, and that “deliberations and consultations between the parties concerned are underway. course, “Reuters reported on Wednesday.
If a deal is struck, “fears of an all-out production war” would be put to rest, said Phil Flynn, senior market analyst at The Price Futures Group. The lack of a deal raised fears of possible free will that would see the UAE and others abandon the agreement on production restrictions.
However, even if the UAE is allowed to produce more barrels, the amount of oil added to the market would likely be the “bare minimum that the market needs” to meet demand, Flynn told MarketWatch.
Matt Smith, director of commodities research at ClipperData, said that if the UAE “gets a rebasing of its production level, which is a reasonable demand, OPEC + will continue its efforts to gradually increase supply to meet growing demand. “
Since, “in theory, this shouldn’t have too much of an influence on current prices. This will only influence the calculations of OPEC + going forward, ”said Smith.
Meanwhile, after an hour of delay, with the Energy Information Administration citing a “technical glitch,” the U.S. government announced that U.S. crude inventories fell 7.9 million barrels for the week ended July 9, marking an eighth consecutive weekly decline.
On average, analysts polled by S&P Global Platts predict a drop of 4.9 million barrels for crude inventories, while the American Petroleum Institute on Tuesday announced a drop of 4.1 million barrels.
Crude supplies fell to their lowest since January 2020 amid “continued strength in refining operations and exports,” Smith said.
However, “implicit demand for gasoline has fallen dramatically, resulting in increased gasoline inventories as distillates continue their upward seasonal advance,” he said. Total finished motor gasoline supplied, an indicator of demand, fell to about 9.3 million barrels per day last week, from about 10 million barrels a week earlier, the EIA said.
“Implied demand for gasoline has fallen dramatically, resulting in increased gasoline inventories as distillates continue their upward seasonal advance.”
Gasoline supplies rose 1 million barrels, while distillate inventories rose 3.7 million barrels for the week, the EIA reported. The S&P Global Platts survey predicted a drop in supply of 1.6 million barrels for gasoline and an increase in inventories of 1.3 million barrels for distillates.
EIA data also showed crude inventories at the Cushing, Oklahoma storage facility fell 1.5 million barrels for the week.
On Nymex, August essence RBQ21
lost 1.1% to $ 2.29 per gallon and August heating oil HOQ21
lost 1.9% to $ 2.14 a gallon.
August NGQ21 natural gas
fell 1% to $ 3.66 per million British thermal units.