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Oil Jumps Again, Testing Consumers’ Patience; Saudi Minister Mutters 'Inflation'

CommoditiesJun 25, 2021 04:08PM ET
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© Reuters.

(updates with Brent settlement prices, weekly gains)

By Barani Krishnan

Investing.com - Crude prices jumped another 3% for the week as market bulls tested the patience of consumers even as the Saudi Oil Minister, who heads OPEC+, muttered concerns about global inflation. 

New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, soared to as high as $74.25 per barrel, a peak not seen since 2018, before settling at $74.05. While the rise on the day was just 75 cents or 1%, WTI gained 3% for the week, bringing consolidated gains over the past five weeks to 17%. For the year, WTI shows an uptick of 52%.

London-traded Brent, the global benchmark for oil, also hit its highest since 2018, at $76.20 per barrel, before finishing the session at $76.18, up 62 cents or 0.8%. Brent rose 3.6% gain on the week, bringing cumulative gains over the past five weeks to 15%. For the year, it is up 47%.

Crude’s latest unhinged rally came as bulls salivated over the prospects of what the 23-nation OPEC+ would do at next week's monthly meeting of the oil producing coalition.

OPEC+ — which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries and its 10 non-member allies steered by Russia — will almost certainly will raise August export quotas for crude at the meeting. But the exact amount to be hiked remains unknown until the July 1 meeting. So far, what’s been reported is that it is considering a 500,000 barrels per day hike, after agreeing to a 440,000-bpd increase in July. 

But it would not be surprising to hear output hawks such as Russia demand a rise as much as 700,000 to 800,000 bpd for August, given that OPEC+ is still withholding 5.8 million barrels daily from the market in supply cuts that began 14 months ago at the height of Covid-19 outbreak when WTI and Brent were trading at an average of $26 a barrel. Shortly after the cuts were decided, WTI even went to minus $40 at one point.

With crude prices having trebled since, major consumers such as India, the third largest oil importer, have been imploring Saudi Arabia to raise production. In the U.S., the world’s largest destination for oil, pump prices of gasoline are already at 7-year highs above $3 per gallon.

The Paris-based International Energy Agency, which looks after the interest of Western oil importing nations, has urged OPEC+ to start tapping its spare production capacity to bolster supply as demand rebounds. 

Even Saudi Oil Minister Abdulaziz bin Salman, who chairs each OPEC+ meeting, surprised many by acknowledging on Thursday that crude prices may have risen too much, too fast. “We have a role in taming and containing inflation, by making sure that this market doesn’t get out of hand.” 

Yet, oil bulls continue pressing ahead, reveling in Iran’s missing this week of a deadline to renew its temporary atomic-monitoring pact with international inspectors. The review is key for ensuring Tehran gets an agreement with global powers to remove U.S. sanctions on its oil exports. 

Data on Friday also showed crude stockpiles in China at February lows, meaning the world's second largest oil importer would probably have to stock up more, to oil bulls' delight.

Oil Jumps Again, Testing Consumers’ Patience; Saudi Minister Mutters 'Inflation'
 

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Comments (8)
Alan Rice
Alan Rice Jun 27, 2021 3:57PM ET
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World Oil glut continues. Tic-toc. ( But hope is on a distant horizon .)
perplexed76 .
perplexed76 . Jun 25, 2021 11:33PM ET
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it looks like beaten hard crypto gamblers dived into gas and oil
KAMAL AHMED
KAMAL AHMED Jun 25, 2021 8:23PM ET
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Thanks but hording and cartelization is not illegal?
Alan Rice
Alan Rice Jun 25, 2021 8:23PM ET
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You might want to check with De Beers ??
Michael Dell
Michael Dell Jun 25, 2021 4:18PM ET
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Oil is heading towards well over $200 before 2024
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Michael Dell
Michael Dell Jun 25, 2021 4:18PM ET
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Barani Krishnan if poor countries like India cant afford it its not the problem of prices of oil,its the problem with the poor economies xD…Oil will break 2008 highs and remain elevated like the 2010-2014 price levels again
Michael Dell
Michael Dell Jun 25, 2021 4:18PM ET
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Barani Krishnan Its the effect of too much printed currencies in a very short period of time
Michael Dell
Michael Dell Jun 25, 2021 4:18PM ET
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Mahmoud Zaki It can cause by disruption to the supply of oil like the 1970s because of instability in natural oil wealthy countries…
Barani Krishnan
Barani Krishnan Jun 25, 2021 4:18PM ET
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I can understand your argument on the world being unable to function a day without oil, but do not forget that under extreme circumstances, humanity adapts. Covid was an example. Did you not see the world grind to a stop and did you not see OPEC being brought to its knees? That was a health crisis, yes, but the same extreme reaction can be expected when people's finances are threatened. And your point that poor economies should allowed to suffer high oil prices because that's their problem reeks of sheer arrogance and ignorance. India is the world's third largest oil importer, do not forget. Even if 30% of its working population resorts to go back to telecommuting for work instead of driving, what do you think that will do to the demand of oil? And do you think China, the world's No. 2 but with millions of peasants too among its population, is going to be happy with these prices? Do not push the consumer over the edge, that's all I'll say.
Barani Krishnan
Barani Krishnan Jun 25, 2021 4:18PM ET
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And for your information, Mike, even Saudi's AbS thinks oil has been gone up too much too soon. Will he do enough about it? Who knows. But one thing's for sure: He's not being arrogant about it, at least not publicly, telling "you poor countries, that's YOUR problem!"
Michael Dell
Michael Dell Jun 25, 2021 3:38PM ET
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US printing press is bidding up prices
Vincenzo Tilotta
Vincenzo Tilotta Jun 25, 2021 3:38PM ET
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Definitely, this is clearly us-pumped inflation, and this is just the beginning, the Fed will continue printing like crazy, oil could turn out to be a good hedge against the american inflation actually
Michael Dell
Michael Dell Jun 25, 2021 3:38PM ET
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Vincenzo Tilotta US has printed 40 percent of total dollars in the last 15 months from the total dollars it printed in the last 220
Ollic David
Ollic David Jun 25, 2021 3:35PM ET
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Okay
ALI SALEM
ALI SALEM Jun 25, 2021 3:30PM ET
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There should be immediate action against this inflation.. This unjustified raise of prices not related to demand!! Demand issue can be solved by increasing the supply which is very easy to be done but the politics play major rule here in order to keep the prices very high.
Fahmi Yazit
Fahmi Yazit Jun 25, 2021 3:30PM ET
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Correct. All goods gonna be pricey do to this stupid decision by Saudis. Ignorance cannot be tolerate. They are just thinking of their pocket money rather than consumer while pandemic still not ended in most country. Now they dunno how to balance..what a stupid Saudis. Curse you opec. Just lift iran sanctions so that will be check and balance rather than controlled by one entity.
Olamide Adesubomi
Olamide Adesubomi Jun 25, 2021 3:27PM ET
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okay
 
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