OPEC+ (not including Iran) will be out of untapped oil supply capacity by year-end. The last time this happened WTI moved over $100/bbl. There is strong resistance at $76 for WTI. Above that, WTI should move quickly to $80, which has been Goldman Sachs Q3 forecast for over three months. - Dan
Bloomberg: Saudis, Russia Have Tentative Deal for Gradual OPEC+ Output Hike
Saudi Arabia and Russia have a tentative deal to gradually increase OPEC+ oil output in the coming months, delegates said.
Negotiations over the details of the supply hike are still underway, the delegates said, asking not to be named because the information is private. The proposal under discussion would add about 2 million barrels a day to the cartel’s output between August and December, they said.
Any agreement would be conditional on the status of talks between Iran and the U.S., who are seeking to revive a nuclear deal and lift sanctions on the Islamic Republic’s oil exports, delegates said.
The evolving debate between the Organization of Petroleum Exporting Countries and its allies has big implications for the oil market and the broader economy.
Crude prices have risen around 50% this year, with the recovery in demand from the pandemic outpacing the revival of OPEC+ supplies after last year’s deep cuts. Oil’s surge, combined with a rally in other commodities, has central banks fretting about inflation again. It also shows how Saudi Arabia and Russia are back in the driving seat of the global energy market -- a remarkable come back from negative prices just over a year ago.
OPEC+
Re: OPEC+
Investing.com – Crude oil prices hit their highest levels in nearly three years on Thursday, after newswire reports suggested that the OPEC+ group of producers is working on a plan that would see their output raised by less than currently expected.
Reuters reported that Saudi Arabia, OPEC's largest producer, and Russia are working on a proposal to raise the group's output by 400,000 barrels a day from August, and by the same amount every month through the end of this year. That would lift output by 2 million barrels a day from current levels as of the beginning of December.
Brent Oil Futures crude gained 2% to $76.14 a barrel by 0700 ET. U.S. West Texas Intermediate Crude Oil WTI Futures crude was up 2.6% at $75.42.
WTI rose more than 10% in June while Brent added more than 8%, touching their highest levels since October 2018.
Ministers from OPEC and its allies have already kicked off a series of meetings to decide on output policy. Reuters reported the group may consider extending its overall supply pact beyond April 2022.
"Given the sharp demand increase we expect for this summer, we think the group will modestly increase production. Even so, the oil market will remain undersupplied," UBS analyst Giovanni Staunovo told Reuters, predicting that larger oil inventory declines will lift prices higher in the third quarter.
The global economy, while booming in places, is still grappling with the emerging variants of the coronavirus. Indonesia, Bangladesh, countries in Europe, Africa and Latin America are battling another wave of the deadly virus that threatens to inhibit the process of normalizing economic life.
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MY TAKE: As I have posted on this board many times, increasing OPEC production by millions of barrels per day is not as simple as opening a few valves. The quick access production is now all back on-line. Further increases will require work and money, which is why Saudi Arabia & Russia are going to agree on post-August increases that are lower than the Wall Street Gang expected. Russia is already back to maximum capacity. U.S. energy independence is now long gone. We are once again at the mercy of OPEC + Russia for vital oil supply. Maybe stopping the Keystone XL pipeline was a stupid idea.
Reuters reported that Saudi Arabia, OPEC's largest producer, and Russia are working on a proposal to raise the group's output by 400,000 barrels a day from August, and by the same amount every month through the end of this year. That would lift output by 2 million barrels a day from current levels as of the beginning of December.
Brent Oil Futures crude gained 2% to $76.14 a barrel by 0700 ET. U.S. West Texas Intermediate Crude Oil WTI Futures crude was up 2.6% at $75.42.
WTI rose more than 10% in June while Brent added more than 8%, touching their highest levels since October 2018.
Ministers from OPEC and its allies have already kicked off a series of meetings to decide on output policy. Reuters reported the group may consider extending its overall supply pact beyond April 2022.
"Given the sharp demand increase we expect for this summer, we think the group will modestly increase production. Even so, the oil market will remain undersupplied," UBS analyst Giovanni Staunovo told Reuters, predicting that larger oil inventory declines will lift prices higher in the third quarter.
The global economy, while booming in places, is still grappling with the emerging variants of the coronavirus. Indonesia, Bangladesh, countries in Europe, Africa and Latin America are battling another wave of the deadly virus that threatens to inhibit the process of normalizing economic life.
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MY TAKE: As I have posted on this board many times, increasing OPEC production by millions of barrels per day is not as simple as opening a few valves. The quick access production is now all back on-line. Further increases will require work and money, which is why Saudi Arabia & Russia are going to agree on post-August increases that are lower than the Wall Street Gang expected. Russia is already back to maximum capacity. U.S. energy independence is now long gone. We are once again at the mercy of OPEC + Russia for vital oil supply. Maybe stopping the Keystone XL pipeline was a stupid idea.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group