Oil futures traded on a mixed note Tuesday after global benchmark Brent crude briefly climbed above $75 a barrel for the first time in more than two years.
Upside was capped after Reuters and Bloomberg both reported that the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, had discussed a further relaxation of production curbs beginning in August.
Reports that OPEC+ is already discussing an increase in its output from August, ahead of its scheduled meeting on July 1, “indicates that the demand-supply gap is already becoming an issue, and that the alliance is working on a plan to tap that deficit,” said Louise Dickson, oil markets analyst at Rystad Energy, in a daily note.
“The OPEC+ chatter to raise supply is the most bearish risk for the recent oil price rally, which has been propelled on strong summer demand and an overall conservative supply environment,” she said.
The most active, U.S. benchmark West Texas Intermediate crude for August delivery
rose 3 cents, or less than 0.1%, to $73.15 a barrel on the New York Mercantile Exchange. July WTI crude
which expires at the end of the trading session, was up 9 cents, or 0.1%, at $73.75 a barrel.
August Brent crude
was down 2 cents, or less than 0.1%, at $74.88 a barrel after hitting an intraday high at $75.30. Brent last traded above $75 in April 2019 on an intraday basis, according to FactSet. It hasn’t settled at a level that high since October 2018.
“OPEC+ will likely loosen supply, either officially with a higher production target from August or unofficially with compliance slippage even earlier,” said Dickson.
The group of producers already has an agreement in place to gradually increase oil production from May through July.
Still, strong physical demand continued to underpin crude, analysts said. The backwardation of the Brent futures curve — with nearby futures prices trading at a premium to later dated contracts — underscores the near-term demand for barrels and is also generating additional speculative interest, said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
On average, analysts polled by S&P Global Platts expects the Energy Information Administration on Wednesday to report a drop of 6.3 million barrels in U.S. crude inventories for the week ended June 18. They also forecast weekly supply increases of 1.3 million barrels for gasoline and 1 million barrels for distillates.
Also on Nymex, July natural gas
tacked on 1.8% to $3.25 per million British thermal units.