Crude futures rose slightly during mid-morning European trade July 18 amid persistent supply concerns following US President Joe Biden’s trip to Saudi Arabia and uncertainty surrounding the Nord Stream gas pipeline as annual maintenance nears completion.
The September ICE Brent futures contract rose $2.32/b from the previous close to $103.58 /b at 10:27 am GMT July 18. The NYMEX August contract was up $1.93/b at $99.63/b over the same period.
President Biden was unable to extract the concrete commitment for greater oil supplies that he was seeking from Saudi Arabia’s Crown Prince Mohammed bin Salman after his trip concluded over the weekend.
Saudi officials affirmed that any increase in production would be implemented through OPEC+ but Biden was optimistic about lower prices at the pump for Americans.
OPEC+ will next convene on Aug. 3. There is little spare capacity aside from Saudi Arabia and the United Arab Emirates, market sources said.
“There was nothing definitive to take away from these meetings with regards to oil production policy,” ING Bank head of commodities strategy Warren Patterson said in a note July 18.
“While comments from the US suggest that they believe that producers in the Middle East will take steps to increase output in the coming weeks, comments from Saudi Arabia were less optimistic,” Patterson added.
There were also concerns surrounding Nord Stream gas supplies as annual pipeline maintenance nears completion on July 21. The resumption of flows once work is complete remains uncertain. A pause in operation would leave Europe with precarious energy supplies heading into winter.
“Supply risks remain evident in international markets, and futures curves remain in backwardation. Despite the ructions in the speculative futures markets, the real-world dynamic remains as supportive of oil prices as ever,” OANDA’s senior market analyst Jeffery Halley said in a note July 18.
“If Russia doesn’t switch gas exports back on to Europe at the end of the week, Brent crude could once again find itself back near $110.00/b.”
United Arab Emirates President Sheikh Mohamed bin Zayed Al-Nahyan will meet French President Emmanuel Macron in Paris July 18. The meeting kicks off a two-day visit expected to focus on energy deals as France seeks to diversify its sources away from Russia.
Elsewhere, the threat of COVID-19 continues to loom over China’s demand outlook. Shanghai will undergo mass testing through July 19-21, city officials said July 18, sparking renewed lockdown fears for the world’s largest oil importer.
Source: Spglobal.com