Time for oil to step back into the spotlight as prices ease, and the OPEC+ group’s next meeting this coming weekend has again raised the now-familiar question: 'will they raise or ease their production cap?'
No change looks like being the obvious answer, even as prices sag. OPEC can’t risk more members such as Iraq throwing a tantrum over restricted production, and even the Saudis will be hesitant because of increasing budgetary problems.
Still, a little rise on Friday was probably a good thing for the group as it contemplates production levels over the rest of 2024.
US West Texas Intermediate (WTI) crude oil rose off a three-month low on Friday, marking the first gain in five sessions even as demand remains light at the start of the US summer season.
WTI crude for July delivery closed up 1.3% by the close at $US77.80 per barrel, while July Brent crude, the global benchmark, was up by just over 1% to $US82.85.
That left WTI off 2.1% for the week, and Brent was down 2.6%. The OPEC+ ministerial meeting this weekend is widely expected to roll production cuts of 2.2 million barrels per day into the third quarter, continuing to limit supply during the high-demand US driving season.
That’s a hopeful scenario, as a surprise increase in weekly US inventories hit prices and confidence.
Meanwhile, the number of oil rigs in the US held steady last week, according to data from energy services company Baker Hughes.
The weekly count for oil remained at 497, but the number of gas rigs fell by four to 99, while miscellaneous rigs remained unchanged at four. A year earlier, the US had 570 oil, 137 gas, and four miscellaneous rigs in operation. Analysts said that even with Friday's gain, WTI is down 6.2% over the past month due to moderate demand, solid supply, and fading hopes for a rate cut after minutes from the last meeting of the Federal Reserve's policy committee showed members were getting concerned about the slow progress in reducing inflation.
"The Fed minutes revealed serious reservations among policymakers about the effectiveness of the current round of monetary tightening, with U.S. manufacturers reporting an increase in prices for inputs, which could be the harbinger of elevated consumer prices in months to come," PVM Oil Associates noted.
