Oil traded near $66 a barrel in New York amid signs Opec nations may clash over production policy when they meet later this month.
Futures fell 0.6 per cent on Friday and are headed for a third week of declines. The US was said to ask key producers to raise output to compensate for potential supply shortfalls, and Saudi Arabia and Russia have signalled they’re ready to increase. However, Venezuela and Iran have written to fellow Opec members urging unity against American sanctions, according to letters seen by Bloomberg News.
Brent futures for August settlement were 86 cents, or 1.1 per cent, lower at $76.46 a barrel on the London-based ICE Futures Europe exchange, after gaining $1.96 on Thursday. The global benchmark traded at a $10.92 premium to WTI for the same month, after settling on Thursday at $11.43, the widest close since February 2015.
Futures rose 0.5 per cent to 468.3 yuan a barrel on the Shanghai International Energy Exchange, after edging up 0.2 per cent on Thursday.
West Texas Intermediate for July delivery was at $65.59 a barrel on the New York Mercantile Exchange, down 36 cents, at 12:46pm in London. The contract is 0.2 per cent lower on the week. Total volume traded was about 16 per cent below the 100-day average.
The Opec meeting may end in failure due to conflicting positions of member countries, according to Sanford C. Bernstein & Co. Crude had rallied to the highest level since November 2014 in late May but has receded since then on speculation the Organisation of Petroleum Exporting Countries will ease production curbs. Meanwhile, US drillers continue to pump crude at a record pace.
“After Saudi Arabia and Russia made the suggestion that Opec starts lifting output in the second half, the market has been on its heels,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen. “In the end, Opec will make sure to tread carefully.”
With some members of Opec resisting the Saudi-Russia proposal to ease output caps that have been in place since the start of 2017, attention is also on a Moscow meeting between Russian President Vladimir Putin and Mohammad Bin Salman, the Saudi crown prince, at a World Cup soccer match on June 14. That’s only eight days before Opec’s crucial Vienna gathering.
The output-boost request from the US, which is not part of the supply deal, was made after US retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about Opec policy and rising prices. It also follows Washington’s decision to reimpose sanctions on Iran, putting the Opec member’s crude exports at risk. Fellow producer Venezuela’s oil industry is also struggling with an economic crisis.