Crude Oil Higher; Attention Turns to OPEC+ Meeting

© Reuters.

By Peter Nurse

AiVIF.com -- Oil prices climbed Friday, with attention turning to next week’s meeting of top producers and the tight supply even amid growing fears of a global economic slowdown.

By 9:10 AM ET (1310 GMT), U.S. crude futures traded 3.5% higher at $99.83 a barrel, while the Brent contract rose 3.5% to $105.37.

U.S. Gasoline RBOB Futures were up 3.7% at $3.2161 a gallon.

Sentiment was boosted Friday by the news that the Eurozone economy grew more than expected in the second quarter, boosted by hefty expansion in the southern European economies of Spain and Italy.

However, it’s important to point out that Germany, Europe’s largest economy and main growth driver, stagnated in the second quarter, and European Central Bank Governing Council member Ignazio Visco warned of the possibility of a recession in the region at an online event on Thursday.

The U.S., the world’s largest consumer of crude, is already in recession, judging by the technical definition of two consecutive quarters of negative growth.

It’s these fears of a severe economic slowdown that mean that both contracts, despite recent gains, are set for a second monthly loss, with WTI down 7% and Brent 5% lower.

Attention next week will turn more towards the supply side of the equation, with the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, set to meet to discuss future production levels.

The members have now unwound the record 9.7 million barrels per day supply cut they agreed on in April 2020, when the COVID-19 pandemic slammed demand.

U.S. President Joe Biden visited Saudi Arabia last month hoping to strike a deal to increase production, and a senior administration official said on Thursday that the United States is optimistic that there could be some positive announcement when the group meets on Wednesday.

These hopes, however, may be based on thin ice as it will be difficult for most of the group to boost supply significantly, given they are struggling to meet their current production quotas due to a lack of investment when prices were lower.

"There are various talks ranging from a small increase to a freeze on current levels," Reuters reported, citing an OPEC+ source.

The CFTC’s positioning data and the Baker Hughes rig count due later in the session round off the week, as usual.