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Futures Movers: Oil prices end mixed as OPEC+ struggles to reach deal on production

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Oil traders stuck to the sidelines Friday, awaiting the outcome of a meeting of the Organization of the Petroleum Exporting Countries and its allies after a dispute emerged over plans to further ease production curbs through the end of the year.

West Texas Intermediate crude for August delivery
CL00,
+0.19%

CLQ21,
+0.19%

fell 7 cents, or 0.1%, to close at $75.16 a barrel on the New York Mercantile Exchange, leaving the U.S. benchmark with a 1.5% weekly gain.

The global benchmark, September Brent crude
BRN00,
+0.24%

BRNU21,
+0.24%
,
rose 33 cents, or 0.4%, to finish at $76.17 a barrel on ICE Futures Europe, for a weekly gain of 1.1%.

OPEC+ had been scheduled to wrap up proceedings Thursday, with investors expecting the group to agree to a deal backed by Saudi Arabia and Russia that would further unwind previously agreed output curbs by allowing production to rise by 400,000 barrels a day per month from August through December — putting an additional 2 million barrels a day of crude onto the market over the remainder of 2021.

An objection by the United Arab Emirates, however, during a meeting of an OPEC+ advisory panel, forced the delay. According to reports, U.A.E. argued that the production baseline used to determine the size of its production curb should be lifted by using the country’s April 2020 output of 3.841 million barrels a day as the reference versus 3.16 million barrels a day in October 2018. That would allow U.A.E. to pump more crude.

As talks between OPEC+ ministers resumed Friday, analysts were cautiously optimistic that a deal could be reached.

Read: What’s next for oil prices as OPEC+ talks fall into disarray

“The U.A.E. had already broken ranks to some extent last year, demanding special rights for itself. Overall, our sense is that OPEC+ has recently become almost too sure of itself in view of the high prices, the tight supply situation and the lack of response from outside the alliance,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.

I don’t think the U.A.E. will get a baseline increase of 700,000, but I do think they will get something. They have been complaining about their position in OPEC for months, and threatened to leave OPEC during the December meeting, which was postponed and ended in no deal.

If OPEC+ were to fail to come to a deal and leave existing curbs in place, it would be a positive development for crude, analysts argued.

“If OPEC+ walks away from this meeting with no agreement, look for WTI to rally to levels above the Oct. 3, 2018 seven-year high” at $76.90 a barrel, said Robert Yawger, executive director of energy futures at Mizuho Securities.

But the reaction by members eager to boost production to take advantage of higher prices in the event of an impasse can’t be guaranteed, other analysts said. If an impasse makes it less likely producers will comply with existing production curbs, prices could suffer.

“As we know, pride comes before a fall, and excessive self-confidence could harm the image of OPEC+ as a reliable trade partner, possibly provoking disputes within the group. This would probably weigh on the oil price in the medium term,” said Commerzbank’s Weinberg.

Oil prices showed little change after data from oil-field-services firm Baker Hughes showed the number of U.S. oil rigs rose by four from last week to 376.

August gasoline futures
RBQ21,
+1.68%

rose 1.4% to end at $2.2998, the highest close for a front-month contract since Oct. 28, 2014, according to Dow Jones Market Data.

See: Buckle up: This July 4, gas prices will hit $3.62 a gallon in some regions

August heating oil
HOQ21,
+1.22%

rose 1.1% to settle at $2.1791 a gallon.

August natural-gas futures
NGQ21,
+1.04%

rose for a ninth straight session, up 3.90 cents, or 1.1%, to finish at $3.70 per million British thermal units — its highest close since Dec. 21, 2018.

Hot temperatures across the U.S. have contributed to the rally, further tightening supplies, said Christopher Louney, analyst at RBC Capital Markets, who noted that spot prices have also jumped in Asia and Europe.

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