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Oil set for best half since 2009 as demand recovery accelerates

Preliminary OPEC+ negotiations have been delayed, as members are seeking to resolve differences on scale of oil output in August and beyond.

Photo: Dado Ruvic/Reuters/Ritzau Scanpix

Oil is on course for its best half yearly performance since 2009, extending gains Wednesday on the latest stalemate in Iranian nuclear talks ahead of a key OPEC+ meeting.

Futures in New York rose 1.4 percent to near USD 74 a barrel on Wednesday, and are up more than 50 percent this year. Diplomats negotiating over Iran's nuclear program are facing the prospect of renewed delays as talks were pushed back with no resumption date set. That’s quelling the likelihood of a quick return of supplies ahead of an OPEC+ meeting Thursday.

The oil producers' alliance has delayed preliminary talks to allow members more time to resolve differences. While Russia has been weighing a proposal to hike output, Saudi Arabia has signaled it prefers a gradual approach amid fresh Covid-19 outbreaks in some regions, and Kuwait has said the group remains cautious.

In the latest bullish data for prices, the American Petroleum Institute reported a 8.15 million-barrel weekly decline in U.S. crude stockpiles, according to people familiar with the data. Government figures are due to be released later Wednesday.

The recovery in key economies such as the U.S. and China has helped underpin a surge in fuel use and sent crude to the highest since mid-2018. OPEC+ sees the market in deficit for the rest of this year if it keeps output steady but virus flare-ups are causing concern. U.K. cases have spiked and Australia is racing to contain outbreaks. Other nations are renewing travel restrictions.

"A rise in production in August, and beyond, would be needed to balance the extra rise in demand," said Hans van Cleef, senior energy economist at ABN Amro. "But uncertainties will keep OPEC and OPEC+ with their fingers on the production buttons."

The drop in stockpiles reported by the API would be the largest since January if confirmed by Energy Information Administration data. The median estimate in a Bloomberg survey is for a decline of 3.85 million barrels. The API said that gasoline inventories rose by 2.42 million barrels.

OPEC+ had been due to convene its advisory body -- the Joint Ministerial Monitoring Committee -- on Wednesday, but that session will now take place on Thursday. Delegates said it was to allow more time for talks, though an official letter attributed the delay to “presidential commitments” for Russian Deputy Prime Minister Alexander Novak.

Oil climbs above USD 73 with report pointing to falling stockpiles 

Improved oil demand pushes prices to highest level since October 2018 

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