Oil started the day bearish, falling for a third consecutive session. Investors continue to speculate on the ongoing production dispute between Saudi Arabia and the United Arab Emirates (UAE) impacting global fuel supply.
As previously reported by Nairametrics, the Organization of the Petroleum Exporting Countries and allies (OPEC+) is yet to decide on August supply. The cause of the impasse is a dispute among members over whether or not the group should extend output cuts.
This impasse has caused the Brent oil futures to decline by over $4.00, from trading $77.80 just two days ago to trade currently at $73.16 at the start of the London session. The Brent oil futures is down 0.36% for the day. The U.S oil followed in the same manner, falling by over $5.00 in 2 days, from trading $76.96 to trade $71.84. The U.S oil is down 0.47% for the day.
Oil prices have surged nearly 50% so far in 2021 as a result of consumption rebounding due to positive vaccination efforts from major oil consumers and the OPEC+ easing in the supply of fuel output. However, investors are concerned about the OPEC+ reaching a deal on output cuts and the outbreak of the COVID-19 delta variant in nations. These two issues have a significant impact on fuel demand recovery.
What they are saying
JPMorgan Chase said in a note that it expects that OPEC+ will eventually agree on a deal in the following weeks to increase output by 400,000 barrels a day each month for the rest of 2021.
Oanda Corp senior market analyst, Edward Moya stated on Bloomberg that, “People are just wildly uncertain about how the OPEC+ stalemate will impact the future output. August is in question and the demand warrants more production.”
What this means
The crude oil supply data from the American Petroleum Institute was released yesterday and showed a draw of 7.983 million barrels for the week ending July 2. Forecasts prepared by Investing.com predicted a 3.925 million barrel draw, while an 8.153 million barrel draw was recorded during the previous week. This means that oil consumption is increasing at a very rapid rate and so far, there is no cause for alarm as demand is increasing. U.S. crude oil supply data from the U.S. Energy Information Administration will be released today.
Investor’s attention will be on the OPEC+ members, looking for indications on the direction the members would take. To stop the current market volatility, investors will now have to hope that the cartel will decide on output cuts soon.
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