Oil climbs toward $67 with market focused on OPEC+ policy meet

Oil advanced in Asian trading with the market focused on an OPEC+ supply policy meeting early this week and any commentary around the prospect for returning Iranian supply.

Futures in New York rose toward $67 a barrel after falling 0.8 per cent on Friday. OPEC and its allies are expected to stick with a decision to boost output in July when the group gathers Tuesday, according to a Bloomberg survey last week. While rebounding demand is driving prices higher, the possibility of more barrels from Iran should a nuclear deal be revived is clouding the outlook.

Iran and world powers have resumed discussions, Russia’s envoy to the United Nations in Vienna said in a tweet, adding that there was an understanding among the countries involved that “the current round should be final.”

Oil is poised for a second straight monthly gain as the US, China and parts of Europe lead a robust demand recovery from the Covid-19 pandemic, despite a virus comeback across Asia. American gasoline stockpiles have declined and consumption gained in the lead up to the Memorial Day weekend, which heralds the start of the summer driving season and peak fuel demand.

“The best course of action for the alliance tomorrow may be to stay on an even keel, maintaining the current pace of tapering,” said Vandana Hari, founder of oil consultancy Vanda Insights. “The latest waves driven by virus variants and a slow pace of vaccinations suggests it will be a very gradual exit from the pandemic through the second half.”

Prices

• West Texas Intermediate for July delivery gained 0.7 per cent to $66.76 a barrel on the New York Mercantile Exchange at 12.06pm Singapore time after advancing 4.3 per cent last week.
  • Futures are up 5 per cent this month.
• Brent for August settlement rose 0.6 per cent to $69.14 on the ICE Futures Europe exchange after losing 0.7 per cent in the previous session.
• There are holidays in the US and UK on Monday.

The prompt timespread for Brent was 39 cents a barrel in backwardation – a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 9 cents a week earlier.

When OPEC+ meets on Tuesday, investors will also be looking for any clues on the next stage of the group’s supply policy amid growing expectations for demand to accelerate through the end of the year. As for July, all but four of 24 analysts and traders surveyed by Bloomberg predicted the alliance would ratify a planned increase of 840,000 barrels a day.

A gauge of China’s manufacturing industry, meanwhile, was little changed in May as soaring input prices weighed on smaller factories, suggesting the economy’s recovery momentum might have peaked for now. Indian data later Monday is forecast to show the nation’s gross domestic product during the first quarter posted a slight pickup in growth year-on-year.