Oil Wavers But Not Far From Resistance As OPEC Sticks to Script By Investing.com

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© Reuters.

By Barani Krishnan

Investing.com – Meet once a month to mitigate any selloff and keep a barrel above $100 by stating cursory production hikes that won’t be met anyway — OPEC+ executed to perfection another scripted monthly move on Thursday that pulled crude prices from recent lows forced by China’s Covid situation and worries over U.S. growth.

crude, the London-traded global benchmark for oil, was down 60 cents, or 0.5%, at $109.54 a barrel by 11:55 AM ET (15:55 GMT) after the May meeting of OPEC+ agreed to a standard production hike of 432,000 barrels per day that has become inconsequential to the market’s supply-demand picture.

New York-traded , or WTI, the benchmark for U.S. crude, was down 90 cents, or 0.8%, at $106.91.

Prices had rallied earlier in the session and came off after Brent peaked at nearly $114 and WTI rose to above $111 — just above their recent resistance. Crude prices started the week on weak footing, with Brent struggling to hold at $103 and WTI almost falling to below $100, as the U.S. crude benchmark threatened to reprise last week’s lows of around $95.

OPEC+ has managed to push crude prices up at each of its meetings over the past year by offering a meager hike of 400,000 barrels per day in monthly production to a market where demand is well above, after the disruptions caused by Covid 2020.

The alliance — made up of the 13 original members of the Saudi-led Organization of the Petroleum Exporting Countries and 10 other oil-exporting nations steered by Russia — has invariably produced less than what it pledged month-after-month, adding to the crude rally.

On Thursday, Saudi Arabia and the United Arab Emirates — the biggest producers in OPEC+ sans the sanctioned Russia — affirmed their intent again to pump oil at well below their capacity while Europe inched toward a full ban on Russian energy products amid supply blockades in Libya.

“OPEC has fallen short of even hitting their previous quotas and it’s another bullish factor as many people question (its) ability to raise production with turmoil in Libya and the growing move to (further) sanction Russian oil,” said Phil Flynn, energy analyst at the Price Futures Group commodity brokerage in Chicago.

An EU embargo will likely force Russian oil exporters to reroute flows to Asia and cut production steeply, while the European bloc tries to compete for the remaining available supply across the world. The developments are expected to keep crude prices at above $100 a barrel, analysts said.

Reuters, citing information from two sources at Thursday’s OPEC+ meeting, said delegates to the talks completely avoided any discussion about sanctions on Russia, wrapping up discussions in near record time of just under 15 minutes.

“OPEC+ continues to view this (Russian embargo) as a problem of the West’s own making and not a fundamental supply issue that it should respond to,” Callum Macpherson from Investec said in comments carried by Reuters.

Macpherson noted that only Saudi Arabia and the United Arab Emirates had capacity to lift supply significantly, adding: “If they were to do so, the ensuing falling out with Russia could bring an end to OPEC+.”

OPEC Secretary General Mohammad Barkindo said on Wednesday it was not possible for other producers to replace Russian exports of more than 7 million bpd. “The spare capacity just does not exist,” he said.

Oil prices are also up after weekly inventory data on Wednesday from the Energy Information Administration showed the stockpile in the U.S. emergency crude reserve at a 20-year low as the Biden administration continued to release oil from there to a supply-starved market.

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