Oil prices hit and then recoiled from highs last seen in October 2018 yesterday as investors eyed the outcome of this week’s OPEC+ meeting, with the United States and Iran wrangling over the revival of a nuclear deal, delaying a surge in Iranian oil exports.
Brent crude for August had slipped 1 cent to $76.17 a barrel while US West Texas Intermediate crude for August was at $74.09 a barrel, up 4 cents.
Oil prices rose for a fifth week last week as fuel demand rebounded on strong economic growth and increased travel during summer in the northern hemisphere, while global crude supplies stayed snug as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies maintained production cuts
The producer group, known as OPEC+, is returning 2.1 million barrels per day (bpd) to the market from May through July as part of a plan to gradually unwind last year’s record oil output curbs. OPEC+ meets on July 1 and could further ease supply cuts in August as oil prices rise on demand recovery.
“Demand recovery has caught everyone by surprise and OPEC needs to respond,” Howie Lee, economist at Singapore’s OCBC bank, said.
“There is some leeway for easing supply curbs given how high prices are, and we might see a 250,000 bpd increase from August.”
ANZ and ING expect OPEC+ to increase output by about 500,000 bpd in August, which is likely to support higher prices.
