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Oil rises 2% as no immediate Saudi output boost expected

Commodities Jul 15, 2022 06:50PM ET
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© Reuters. FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. REUTERS/Grigory Dukor
 
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By Laila Kearney

NEW YORK (Reuters) - Oil gained 2.5% on Friday after a U.S. official told Reuters that an immediate Saudi oil output boost was not expected, and as investors question whether OPEC has the room to significantly ramp up crude production.

The comment during U.S. President Joe Biden's Middle East visit comes at a time when spare capacity at members of the Organization of the Petroleum Exporting Countries (OPEC) is running low.

"Part of the support is that everybody and their brother who digs down into the Saudi situation see that they don't have a lot of capacity left," said John Kilduff, partner at Again Capital LLC in New York.

Brent crude futures settled at $101.16 a barrel, rising $2.06, or 2.1%, while West Texas Intermediate crude settled at $97.59 a barrel, gaining $1.81, or 1.9%.

Both benchmarks saw their biggest weekly percentage drops in about a month, largely on fears earlier in the week that a nearing recession would chop away at demand. Brent lost 5.5% in its third weekly drop, while WTI was down 6.9% in its second weekly decline.

Biden, prompted by energy and security interests, arrived in Jeddah on Friday and had been expected to call for Saudi Arabia to pump more oil.

But the United States does not expect Saudi Arabia to immediately boost oil production and is eyeing the outcome of the next OPEC+ meeting on Aug. 3, a U.S. official told Reuters.

"If the market was expecting an announcement between President Biden and (Saudi Crown Prince) Mohammed Bin Salman that oil production was going to be increased, they were sorely disappointed," said Andrew Lipow of Lipow Oil Associates in Houston.

"But I do think that in the upcoming weeks, especially at an upcoming OPEC meeting, we might see production increases out of both Saudi Arabia and the United Arab Emirates."

The United States could still secure a commitment that OPEC will boost production in the months ahead in hopes that it will provide a signal to the market that supplies are coming if necessary.

Meanwhile, the U.S. oil rig count, an early indicator of future output, inched up by two to 599 this week to their highest since March 2020, energy services firm Baker Hughes Co said.

Also signalling more oil supply on the horizon was Libya's oil chief, who said crude output will resume after meeting groups that have blockaded the country's oil facilities for months.

Lifting force majeure on production could mean a return of 850,000 barrels per day.

On the economic front, the U.S. Federal Reserve's most hawkish policymakers on Thursday said they favoured a rate increase of 75 basis points at its policy meeting this month, not the bigger increase traders had priced in after a report on Wednesday showed inflation was accelerating.

Concerns that the Fed might opt for a full 100 bps rate rise this month and weak economic data had led to Brent and WTI shedding more than $5 on Thursday to below the closing price on Feb. 23, the day before Russia invaded Ukraine, though both contracts clawed back nearly all the losses by the end of the session.

Analysts, however, expect continued pressure on oil from concerns over the global economy.

"Brent has dipped noticeably below $100 per barrel this week. It is likely to continue sliding given that the recession fears will presumably not abate for the time being," Commerzbank (ETR:CBKG) said in a note.

Bearish market sentiment has also followed renewed COVID-19 outbreaks in China, which have hampered a demand recovery.

China's refinery throughput in June shrank nearly 10% from a year earlier, with output for the first half of the year down 6% in the first annual decline for the period since at least 2011, data showed on Friday.

(This story refiles to remove repeated line of text)

Oil rises 2% as no immediate Saudi output boost expected
 

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Comments (7)
Royce Murph
Royce Murph Jul 14, 2022 6:38PM ET
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No, actually oil is flat after a knee jerk reaction to CAN 100 bps increase.  Lets get our headlines straight.  Exhausted with false assumption fear articles...
EL LA
EL LA Jul 14, 2022 2:44PM ET
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Oil is the same price it was in 2009.  The average national income in the USA was ~ $10k in 1981.  It is 6X that now. Did anyone honestly expect to pay $2 for gasoline forever?
Trumpster Rocks
Trumpster Rocks Jul 14, 2022 2:44PM ET
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Yes The Real President Trump had it down to 1.80's but now we have the thing called brandon keeping his promise to get rid of gasoline powered vehicles. Should be Under the Gitmo.
EL LA
EL LA Jul 14, 2022 10:53AM ET
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How do you fake lower demand? Force the USD higher by scaring the markets to go to cash, cancel thousands of flights this summer, forcing thousands of eager travelers to be stranded at airports, all the while continuing to scare people about catching a cold.
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Surya Kartilas
Surya Kartilas Jul 14, 2022 10:53AM ET
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well demand is growing as population exponentially grow.. was anyone able to get hungry ? naked colder ? and homeless ?
EL LA
EL LA Jul 14, 2022 10:53AM ET
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Surya Kartilas  Well, then maybe the top CEO's need to step up and share their wealth by giving  their workers a decent raise so they can afford living expenses. It's time to bring more balance into the pay arena. It's ridiculous that the Fed would starve the economy by hiking rates, thus preventing supply (jobs) and demand (higher wages) its due process. I see two scenarios. Inflation...more jobs, higher wages...and perhaps some may choose hamburger over steak. Or, deflation....job loss....recession.....no job, no money....no choices at all for the masses.
Brad Albright
Brad Albright Jul 14, 2022 10:53AM ET
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This is true. I was at the meeting of the secret cabal last night and we were all saying how well our plan was working. We did not think the airlines would go along with canceling thousands of flights since it is against their interest, but we warned the that if the did not we would reveal the truth about their beverage carts. Looks like that threat worked. Everything is going according to plan. Next up making American housewives hornier so they'll have more abrotions.
John Cerniuk
John Cerniuk Jul 14, 2022 10:53AM ET
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population growth is actually slowing
Tom Scurlock
Tom Scurlock Jul 14, 2022 10:53AM ET
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John Cerniuk and also they are making sure it dliws even more with the vaccines.
Crypto Current
Crypto Current Jul 14, 2022 8:43AM ET
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Protect yourself buying oil&gas stocks against inflation
Márcio Ramos
Márcio Ramos Jul 14, 2022 8:43AM ET
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LOL
Mike Wellons
Mike Wellons Jul 14, 2022 7:27AM ET
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Latest released CPI was for June, when oil was at its highest. In July, oil began falling, and this will result in much lower CPI numbers for July. Oil is a component of CPI, but it also drives the other components ... where Oil hoes, CPI goes. We don't need 100 basis point hike, or even 75 basis points. Let's hope the Fed understands this
ZS Beck
ZS Beck Jul 14, 2022 7:27AM ET
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I Agree, The Fed is supposed to think forward. There is no way from 2022-2023 will be the same high inflation if prices are stable. No rates raise is necessary for a slowing economy. I
Daniel Hall
Daniel Hall Jul 14, 2022 7:27AM ET
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they probably will stay on track though. they are more afraid of inaction than recession. they would rather save face than the economy, otherwise they wouldn't have hiked .75 last month
Jeff Chevalier
Jeff Chevalier Jul 14, 2022 7:27AM ET
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And what about two months from now? If oil goes back up (which it immediately will if the Fed doesn't raise rates) you'll be in the exact same place.
Casador Del Oso
Casador Del Oso Jul 14, 2022 7:27AM ET
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So when will rent, groceries, and mortgage interest rates start falling?
ishak ahmad
ishak ahmad Jul 14, 2022 4:46AM ET
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usd up to pressure oil production to pump more
Muhammad Tufail
Muhammad Tufail Jul 14, 2022 3:53AM ET
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It's all drama
 
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