Oil slides on inventories, OPEC+
Crude prices tumbled after gasoline and distillate inventories grew and the standoff between Saudi Arabia and the UAE was poised to end, which would allow OPEC+ to increase output in August. The Delta variant has put a dent in short-term crude demand outlook and oil prices seem like they can continue to drift lower.
Now that all appears to be well in OPEC+, fears that this coordinated effort will end will get pushed back a little while longer. Now that Abu Dhabi and Riyadh have made enough progress to resolve the standoff that stemmed from the failed July 1st meeting on output, energy markets will have to wait till next month’s meeting to see how other countries posture for market share.
The deal will take some time to get finalized, but it seems the UAE will be allowed to produce more output next year. It seems OPEC+ will shortly have a plan to raise output and that is welcomed news, as surging demand had oil market getting too tight.
Energy traders had to wait for the weekly petroleum status report as the EIA had issues uploading the data. Another large draw did little to boost oil prices as traders focused on the first rise in total petroleum stocks since early June. The report showed jet fuel demand continues to improve, increasing 186,000 bpd to 1.56 million bpd. US crude demand is almost completely back to normal levels and that should continue to improve throughout the rest of summer.
Gold prices were boosted after Fed Chair Powell’s prepared congressional testimony signaled the Fed is still a ways off from altering monetary policy. The Fed does not seem to be in a rush to tap the brakes on stimulus as the labour market recovery still has a long way to go. The Fed seems stubbornly dovish and willing to tolerate a few more months of surging pricing pressures before considering a change of tune over the transitory/persistent inflation debate.
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