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

© Reuters.

By Barani Krishnan

AiVIF.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 consolidating to trade at $76.01, up 45 cents or 0.6%. Brent was on track to a 3.4% gain for the week, bringing cumulative gains over the past five weeks to 14%. For the year, it is up 47%.

Crude’s latest unhinged rally came as bulls salivated over the prospects of what 23-nation OPEC+ — which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries and its 10 non-member allies steered by Russia — would do at next week's monthly meeting of the oil producing coalition.

OPEC+ almost certainly will raise August export quotas for crude at the meeting, though the exact amount 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, has 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 of a deadline to renew its temporary atomic-monitoring pact with international inspectors that is key to getting an agreement to remove U.S. sanctions on its oil exports.

Data also showed crude stockpiles in China, the second largest oil importer, at February lows.