Oil steadies after US urges producers to hike output

Singapore — Oil prices were steady on Thursday after two days of gains after a call from the US, the world’s top oil consumer, for major producers to boost output reinforced supply concerns as economies ease their coronavirus restrictions.

They were also boosted by a pullback in the US dollar, which can send speculative investors into greenback-denominated assets like commodities.

Brent crude futures edged higher by 8 US cents, or 0.1%, to $71.52 a barrel by 5.02am GMT, while US West Texas Intermediate (WTI) crude futures gained by 5c to $69.30.

“Oil prices rebounded for a third day as President Joe Biden’s infrastructure plan boosted reflation hopes, underpinning the energy demand outlook,” said Margaret Yang, a strategist at DailyFX.

The US Senate late on Tuesday passed a $1-trillion infrastructure bill that will expand transportation systems and likely lead to a number of energy-consuming construction projects.

Biden’s administration on Wednesday urged oil cartel Opec and its allies, known as Opec+, to boost oil output to tackle rising petrol prices that they see as a threat to the global economic recovery.

Opec agreed in July to boost output each month by 400,000 barrels per day (bpd) over the previous month, starting in August, until the rest of their record cuts of 10-million bpd, about 10% of world demand, made in 2020 are phased out.

However, there are still concerns that the increase will not be enough to meet demand as the US and Europe ease their coronavirus-induced movement restrictions.

“The Biden administration said that the recently agreed production increases will not fully offset previous production cuts imposed during the pandemic,” said ANZ in a note.

Later, the White House said its outreach to Opec+ is ongoing and aimed at long-term engagement, not necessarily an immediate response.

The administration added it had not called on US producers to ramp up production, which led the market to turn higher on Wednesday, said Phil Flynn, a senior analyst at Price Futures Group in Chicago.

Other data from the Energy Information Administration report weighed on prices. US crude oil stockpiles fell modestly last week, out of step with forecasts, while petrol inventories dipped to their lowest level since November. More volatile weekly demand numbers also declined. 

Reuters