It is starting to look like an old-fashioned OPEC struggle between the really greedy and the just greedy members of the cartel and their Russian mates.
OPEC and non-OPEC ministers (led by Russia) finished Friday’s virtual meeting without a resolution and they will meet again later today on oil output policy.
The lack of agreement didn’t worry oil markets all that much. Brent crude settled up 33 cents, or 0.44% at $US76.03, and US West Texas Intermediate (WTI) crude settled down 7 cents, or 0.09% at $US75.16. That left Brent up 0.9% for the week and WTI up 1.6%.
OPEC+ met again on Friday for a second day after failing to reach agreement as expected on whether to keep the output cap unchanged or to allow a gradual rise.
OPEC+ – except for the United Arab Emirates (UAE) – agreed to an easing of cuts and their extension to the end of next year, according to Reuters citing an OPEC+ source. The UAE said the extension is conditional to revising its baseline production, Reuters reported.
The meeting had agreed in principle to increase supply by 400,000 barrels a day from August to December 2021 in order to meet rising demand, Reuters reported, citing unnamed OPEC+ sources.
Reuters reported that Saudi Arabia and Russia had proposed extending the duration of cuts until the end of 2022.
However, Reuters reported that the UAE opposed these plans on the grounds that OPEC+ should change the baseline for cuts, effectively raising its production quota.
OPEC+ has already announced plans to increase supply by 2.1 million barrels per day between May and July.
The group had been expected to raise supply by around 500,000 barrels a day from next month, slightly higher than the reported proposal to increase by 400,000 barrels. The group is also worried by the prospects of a surge in supply later in the year.
But the continuing spread of the delta Covid-19 variant worldwide is boosting concerns of a setback to oil demand.
Renewed lockdown measures and rising costs have already resulted in slower factory growth in China, for instance, while new cases are building in the UK and parts of the US and Australia.
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Meanwhile the weekly rig use report for the US from Baker Hughes showed a rise last week
Baker Hughes reported the total number of rigs operating in the US reached 475 last week – up five on a week earlier.
There was a four-unit increase in oil rigs (to 376), a one-unit increase in gas rigs (to 99), and no change in the number of miscellaneous rigs (zero).
Compared to the same week in 2020, the total US count is up 212 rigs.
The US offshore rig count this past week held steady at 14, compared to 12 at this time last year.
US oil stocks fell 6.7 million last week to 452.3 million and daily production was estimated at 11.1 million barrels a day, down slightly from 10.9 million a year ago.
That suggests US oil well productivity is weakening – production is up roughly 200,000 barrels a day but the number of rigs in use is up 212.
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Meanwhile gold and silver continue to move sideways despite the very solid jobs report for June and higher wages.
US Treasury 10-year rates continue to ease, down to 1.437% on Friday. That was down almost 10 basis points from the previous Friday’s close.
Comex gold futures rose 0.4% to $US1,783.30 an ounce and then rose in after-hours trading to around $US1,787 an ounce, leading to some faint hopes of regaining $US1,800 this week.
Copper continues to rise, up to $US4.2760 a pound on Comex for a gain of 1% for the day and just 0.06% over the week.
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Iron ore prices finished the week easier. The price of 62% Fe fines lost $US1.34 to close at $US217.98 a tonne. It was also up $US1.53 a tonne over the week.
The price of 58% Fe fines slid $US2.15 to $US180.36 a tonne. That was down around $US6.80 a tonne or more than 3%.
And the price of 65% Fe fines from Brazil closed at $US251.60 a tonne, down 80 cents on Friday. The price was up 90 cents over the week.
