World oil indices collide following ambiguous OPEC pact

The two most important oil markers in the world behave very differently as a result of the OPEC meeting in Vienna.

Brent crude is halted by Saudi Arabia's promise to boost production after an ambiguous OPEC pact and contradictory statements from other countries the price climbed Friday, while declining stocks support West Texas Intermediate. The gap between European and US markers has been reduced by almost 20% on Monday and has almost halved in less than a week.

Goldman Sachs Group Inc. said the oil market was still in a deficit position as inventories declined and the risks of supply disruption remained high.

Inventories at the largest storage center in the United States collapsed for five weeks with the start of the summer driving season when demand peaks. These declines could accelerate when an oil sands oil outage in Canada will leave North America short of supply, supporting the WTI, Goldman said. While the prospect of an increase in OPEC crude oil is currently weighing on Brent, the bank believes that an even aggressive increase in production will only lead to a slight surplus that would leave the market with a small remaining capacity.

"Brent prices are adjusting more than WTI because Brent is relatively more overvalued than WTI," said Kim Kwangrae, commodity analyst at Samsung Futures Inc., on the phone. "The vague wording in OPEC's official statement suggests that there was probably a disagreement within the group until the end, and if it was not for the group, it would not be good for them. ambiguous agreement, there is a chance that the group has not reached agreement. "

Also read the highlights of OPEC: The stories that matter from the Vienna oil marathon

The Brent futures contract for the August settlement fell from $ 1.81 to $ 73.74 a barrel on the ICE Futures Europe Exchange, and was trading at $ 74.08 at 10:57 am in Singapore. The contract earned $ 2.50 to settle at $ 75.55 a barrel on Friday.

In contrast, WTI crude for delivery in August fell just 26 cents to $ 68.32 a barrel after winning earlier. The contract jumped 4.6% to $ 68.58 on Friday. The total volume traded was almost three times the 100-day average.

The different reaction reduced the Brent premium to $ 5.77 from more than $ 10 last week.

Futures contracts rose 1.5% to 465.7 yuan a barrel on the Shanghai International Energy Exchange, after edging down 0.2% on Friday.

Saudi Energy Minister Khalid Al-Falih has reported a real supply gain approaching one million barrels a day after the adoption by the government. OPEC of a pact to reduce production. He was trying to reassure the market after several cartel members said that the real increase would not reach 700,000 because some nations are unable to pump more.

The agreement of the OPEC, which was concluded after a last minute compromise with Iran, is a victory for Saudi Arabia and Russia that initially proposed an increase. The production barriers of the group and its allies since last year have helped eliminate a global glut and have propelled Brent to $ 80 per barrel for the first time since 2014. They now have more leeway to respond. to supply risks disrupting Iranian and Venezuelan exports.

See also: Perplexed by OPEC, hedge funds give way to oil in the air

Iran said he does not believe that buyers of his oil will obtain waivers from the US government that would allow them to continue to buy cargo after the renewal of sanctions of US President Donald Trump. This is a signal that the Islamic Republic's exports could fall much further, faster than expected.

Technically, OPEC and its partners will strive to meet 100% of the production quotas adopted about 18 months ago, release posted after last week's meeting. The group The compliance rate was 162% in May, according to Bloomberg calculations based on OPEC's secondary source data.

Russian Minister of Energy Alexander Novak said his country could increase production 170,000 to 200,000 barrels a day, and Al-Falih has increased from 250,000 to 400,000 barrels a day. Meanwhile, every minister seemed to have his own interpretation of what hiking meant for the market. Iran has seen less than 700,000 additional barrels a day and Iraq predicted that it could be up to 800,000.

Al-Falih's assurance of maintaining the market equilibrium, supported by his Russian counterpart, came after Trump slammed OPEC to artificially inflate prices, as well as more conventional lobbying by major oil buyers. While the group reached an agreement, Iran and Venezuela criticized Saudi Arabia's stance, saying the agreement did not allow any member to replace each other's market shares.

Meanwhile, the According to Scott Sheffield, president of Pioneer Natural Resources Co., the largest shale area in the United States will have to close the wells within four months because there are not enough pipelines to route oil to customers.

News from the oil market:

• Money Managers Bullish ICE Brent crude bets on 2,506 net long-term positions at 458,449, weekly ICE Futures Europe futures and options data.
• Oil Explorers Drilling reduced in the United States last week for the first time in almost three months.