- OPEC+ delegates suggest no September output hike
- US sees consecutive quarterly GDP contractions
- US Dollar tests 1-month lows
Crude oil futures settled higher July 29 as tight supply outlooks and a weaker US dollar overshadowed economic uncertainty and recession fears, reports Platts.
NYMEX September WTI settled $2.20 higher at $98.62/b, and ICE September Brent climbed $2.87 to $110.01/b.
Intense lobbying efforts from the US
OPEC+ delegates said July 29 there is a real possibility the group will not raise production in September, despite intense lobbying efforts from the US and its allies.
The decision will reveal how the OPEC+ alliance, in particular Saudi Arabia and the UAE, has assessed the market’s outlook, including the prospects of a global recession that would take a bite out of oil demand
Under the current OPEC+ pact, the group will in August eliminate the last of its output cuts and restore its quotas to pre-pandemic levels.
The US and other major consuming nations have pushed OPEC+ leaders to continue hiking production, a major topic of discussion surrounding US President Joe Biden’s July 15-16 summit in Jeddah, Saudi Arabia. Dated Brent remains well above $110/b, contributing to cost-of-living crises in many economies.
NYMEX August RBOB settled 2.35 cents higher at $3.4881/gal, while August ULSD declined 6.16 cents to $3.6247/gal.
Recession worries
The US economy contracted by an annual rate of 0.9% between April and June, against analysts’ expectations of a modest 0.5% gain, data from the Commerce Department showed July 28. This marked two consecutive negative quarters of US growth.
While the data appeared to confirm a technical recession for the US economy, analysts, nonetheless, noted the labor market remains tight with hundreds of thousands of jobs added each month.
“The technical recession was not declared official, considering that the US labor market remains healthy, but tighter conditions ahead suggest that such risks remain prominent,” IG market strategist Yeap Jun Rong said in a July 29 note.
The data was bearish for the US Dollar, which in turn supported crude prices. The ICE US Dollar index fell below 106 in afternoon trading, on pace for the lowest close since July 4.
“With no major signs of fuel demand destruction, oil seems like it will soon find a home above the $100 a barrel mark,” OANDA senior market analyst Ed Moya said in a note, adding: “WTI was unable to hold onto the $100 level as profit-taking kicked in.”
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Source: Platts
