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Crude oil futures ticked slightly lower Tuesday after news reports said Russian Deputy Prime Minister Alexander Novak suggested OPEC+ could raise production if warranted by market conditions, as well as other indications of reduced supply concerns.
“It always depends on the current situation, the balance of supply and demand… We need to look at how the market is feeling,” Novak said, according to Interfax.
OPEC+ has been expected to roll over existing voluntary cuts of 2.2M bbl/day beyond Q2, and the cartel is expected to decide on production levels at a meeting on June 1.
Commerzbank’s Carsten Fritsch says one obstacle for OPEC could be the insufficient implementation of the agreed cuts by some countries such as Iraq and Kazakhstan, which he said significantly exceeded their production targets in Q1, although both countries have presented plans outlining how they plan to compensate for overproduction by year-end.
In its latest short-term energy outlook, the U.S. Energy Information Administration raised its forecast for this year’s world oil and liquid fuels production and lowered its demand expectations, pointing to a well-supplied market as opposed to prior forecasts that showed undersupply.
The report also noted that despite Middle East tensions, price volatility has been “subdued” for much of this year by “significant” spare crude production capacity.
Front-month Nymex crude (CL1:COM) for June delivery settled -0.1% to $78.38/bbl, its sixth decline in seven sessions, and front-month July Brent crude (CO1:COM) closed -0.2% to $83.16/bbl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
The Biden administration is again seeking bids to refill the Strategic Petroleum Reserve as oil prices move back below the $79/bbl cap it set itself for the replenishment, announcing solicitations Tuesday for as much as 3.3M barrels to be delivered in October.
In April, the Department of Energy canceled planned purchases of 1.5M barrels each for August and September when prices jumped above the cap.
SPR stockpiles have increased in each of the past six months as the DoE continued its efforts to replenish the stockpile, buying 32.3M barrels of oil for an average price of $76.98/bbl, and accelerated nearly 4M barrels of exchange returns.
Despite the additions, levels in the reserve remain near all-time lows at levels equal to those seen in October 1983.
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