Oil Loses Steam With Traders Eyeing OPEC+ Supply Hike

(Bloomberg) -- Oil declined as investors assessed reports that Russia and other OPEC+ nations are considering increasing production.

Futures in New York switched between gains and losses on Tuesday and Brent crude slipped after crossing $75 a barrel in Asian trading hours. While price indicators and inventory data show a pattern of demand outstripping supply, there are concerns that OPEC+ will hike output. The OPEC+ coalition will meet next week and Russia -- which jointly leads the alliance with Saudi Arabia -- was reported to consider a proposal that the group continue to revive halted output in August. Meanwhile, a stronger U.S. dollar also reduced the appeal of commodities priced in the currency.

Global progress in vaccination has underpinned a robust consumption recovery in the U.S., China and Europe, boosting benchmark crude prices into the $70-a-barrel range. In the U.S., fuel demand last week jumped to the highest this year. Market gauges are reflecting the growing strength, with one timespread for West Texas Intermediate expanding to the widest backwardation in seven years on Monday.

The Organization of Petroleum Exporting Countries and its partners have maintained discipline toward restoring shuttered supplies during the pandemic. The group will gather on July 1 to weigh another hike. While Saudi Arabia has signaled it prefers to maintain a cautious stance, the roaring comeback in demand is putting pressure on the kingdom to open the taps.

However, it is also unlikely that OPEC+ will increase production dramatically while the negotiations around the Iran nuclear deal remain in progress, said Moya.

“Until we get to that meeting, we’re going to see some posturing ahead of it,” he said.

In the U.S., crude stockpiles are seen falling 3.5 million barrels last week, according to a Bloomberg survey of analysts. The industry-funded American Petroleum Institute will release its inventory data later Tuesday, while the U.S. government’s report is due Wednesday.

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