Crude Oil Edges Lower; Russia Considering OPEC+ Output Increase

© Reuters.

By Peter Nurse

AiVIF.com -- Crude oil prices edged lower Tuesday, consolidating after recent strong gains as traders consider the possibility of additional supply hitting the market next week.

By 9:30 AM ET (1330 GMT), U.S. crude was down 0.4% at $72.81 a barrel, after surging 2.8% on Monday, while Brent was down 0.2% at $74.72, after earlier Tuesday rising above $75 a barrel for the first time since April 2019. 

U.S. Gasoline RBOB Futures were up 0.7% at $2.2115 a gallon.

Weighing on the market Tuesday was a report that Russia was considering proposing an increase in oil output at next week’s meeting of the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+.

The group has been steadily increasing output as the global economy recovers from the ravages caused by the Covid-19 pandemic, but is still withholding more than 5 million barrels a day of production from the market.

However, the overall tone remains positive, with both benchmarks over 40% higher year-to-date, on hopes of a quick return to peak demand as successful vaccination programs lead to a prompt reopening of the high energy-consuming conditions in the U.S. and Europe.

Additionally, negotiations between the U.S. and Iran to revive the 2015 nuclear deal were paused at the end of last week, with the Persian Gulf country electing a new president Ebrahim Raisi, a hardline judge that the U.S. has previously sanctioned for alleged human rights abuses.

Iran has the fourth largest oil reserves in the world, and the removal of U.S. sanctions would allow it to resume exporting to the global market.

BP (NYSE:BP) CEO Bernard Looney stated in a conference Tuesday that there was a strong possibility that the high oil prices will sustain over the coming year, with shareholders benefiting via a stable, resilient dividend, and especially through a buyback program.

Investors will also focus on the weekly U.S. inventory data from the trade body, the American Petroleum Institute, later Tuesday, with crude stocks expected to drop for the fifth consecutive week.

The Energy Information Administration, an official body, said last week that U.S. crude oil stockpiles dropped sharply the previous week as refineries boosted operations to their highest since January 2020.