Oil heads for weekly fall as Opec looks to lift supply

Tokyo/Singapore — Oil prices changed little on Friday, heading for their biggest weekly drop since March after supply concerns spooked investors, with Opec likely to add more barrels amid expectations that demand is returning as more countries recover from the pandemic.

Brent crude for September was down 2c at $73.45 a barrel by 3.38am GMT and is heading for a 3% fall this week after two days of heavy declines.

US crude for August fell 1c to $71.64 a barrel and is on track for a decline of about 4% this week.

Discussions on supply policy within Opec, Russia and other producers, a group called Opec+, ended without agreement this month after the United Arab Emirates (UAE) objected to extending the output policy beyond April 2022.

Saudi Arabia and the UAE reached a compromise this week, paving the way for Opec+ to finalise an agreement that would allow more supply into the market. “All signs indicate that Opec+ is heading for a potential compromise agreement that will allow the UAE to secure a baseline adjustment, but other producers will undoubtedly seek similar treatment and potentially prolong the deliberations heading into the August ministerial meeting,” RBC Capital analysts said in a note.

Opec said on Thursday it expects world oil demand to increase next year to around levels seen before the pandemic, about 100 million barrels per day (bpd), led by demand growth in the US, China and India.

Opec output in June increased by 590,000 bpd to 26.03-million bpd, the report showed.

“Output should rise further in July on the back of larger quotas, and we expect high prices to incentivise more production from the group even without a formal agreement to do so,” Capital Economics said in a note.

A large decline in crude stockpiles in the US has done little to support prices as a rise in petrol inventories in a week that included the Fourth of July holiday, when driving usually surges, raised fresh demand concerns.

Reuters