Oil holds steady after UAE rejects Opec+ plan to lift output

Melbourne — Oil prices held steady on Friday after Opec+ ministers delayed a meeting on output policy as the United Arab Emirates balked at a plan to add 2-million barrels per day (bpd) in the second half of the year.

US West Texas Intermediate (WTI) crude futures were up 5c at $75.28 a barrel at 1.55am GMT, having jumped 2.4% on Thursday to close at their highest since October 2018.

Brent crude futures inched up 4c to $75.88 a barrel, after rising 1.6% on Thursday.

Both benchmark contracts posted strong gains on Thursday as a plan backed by Saudi Arabia and Russia for Opec and allies, together known as Opec+, to add back 400,000 bpd each month from August through December 2021 was more cautious than investors had expected.

Prices retreated after the plan met resistance from the UAE and Opec+ postponed a ministerial meeting to Friday.

“Failure to come to an agreement could mean that the group continues with current levels of production, which would mean that the market tightens even quicker,” ING commodities strategists said in a note.

If existing curbs are extended, however, some Opec+ producers may be less willing to stick to their quotas, which would result in an increase in supply, ING said.

WTI was on track for a 1.6% rise for the week with the US crude market seen tightening as refinery runs pick up to meet recovering petrol demand, while US shale oil production has not risen at the same pace.

Brent was heading for a 0.5% fall for the week, reflecting concerns about fuel demand in parts of Asia where cases of the contagious Covid-19 Delta variant are surging.

Citi analysts said they do not expect WTI to climb to a premium to Brent, as they expect US oil output to pick up at the end of 2021 and grow further in 2022.

Reuters