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Oil Has First Weekly Loss in Seven as OPEC Worry Tempers Bull Market

CoronavirusJul 09, 2021 03:56PM ET
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By Barani Krishnan - Crude prices posted their first weekly loss since mid-May as worries about trouble within OPEC tempered the bull market for oil.

The loss was a tiny red bleep after six straight weeks of gains and looked small enough — just 6% on the week — for longs in the market to shrug off. 

But the broader troubles within the 13-member Saudi-led Organization of the Petroleum Exporting Countries and its 10 oil producing allies led by Russia were large enough to remain on their minds.

“Energy traders can’t get a handle of what crude supply to expect in August,” said Ed Moya, who heads U.S. research at online broker OANDA. “The short-term supply side uncertainty suggests we could see a shortfall in the coming weeks, but that it could threaten the stability that has come from the coordinated efforts made by OPEC+.”

New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled Friday’s trade up $1.62, or 2.2%, at $74.56 a barrel. 

London-traded Brent, the global benchmark for oil, settled Friday’s trade up $1.43, or 1.9%, at $75.55. For the week though, Brent lost 0.8%.

WTI lost a combined 5.5% between Monday and Tuesday before recovering in the last two sessions. The initial plunge was sparked by a row between Saudi Arabia and the UAE on August production quotas that led to fears that OPEC+ will no longer exercise the sort of care it did over the past year on output cuts.

Moya also noted that Thursday’s low for WTI also coincided with the low made with the 10-year Treasury yield, suggesting the majority of the rally “has nothing to do with traditional supply or demand drivers”.  

Until last week’s OPEC+ meeting, oil had a near-perfect rally, with WTI up 57% on the year and Brent up almost 50%.

But the fallout between one-time staunch allies Saudi Arabia and the UAE is threatening to undo OPEC+’s discipline on output cuts that had brought WTI to seven-year highs from from pandemic lows of minus $40 per barrel.

Oil Has First Weekly Loss in Seven as OPEC Worry Tempers Bull Market

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Comments (1)
Guy Gram
Guy Gram Jul 09, 2021 4:33PM ET
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And so it goes, money in one hand out the other for OPEC+. If UAE gets back on board and a deal comes before the end of July then all is well again.  On the other hand the latest inventory report showed demand for gasoline at record levels in the USA. If next weeks report shows similar draws the market might start buying the short term supply "crisis" narrative. A few more weeks of excessive draws will over shadow any OPEC fears.
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