(Bloomberg) — Oil was steady ahead of an OPEC+ meeting on Monday to discuss production policy amid a rapidly tightening market.
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Futures in New York traded near $76 a barrel after capping a sixth weekly gain on Friday. The alliance, led by Saudi Arabia and Russia, may have to consider raising output in November by more than its planned 400,000 barrels a day, according to some industry consultants and traders. OPEC’s own modeling is showing demand will outstrip supply over the next two months.
The market has tightened significantly recently following a robust rebound in demand from economies recovering from the pandemic and a supply disruption in the Gulf of Mexico due to Hurricane Ida. Surging natural gas prices ahead of winter have also raised the prospect of higher volumes of oil products such as diesel being consumed in power generation.
The market has firmed in a bullish structure due to the tightening. The prompt timespread for Brent was 77 cents a barrel in backwardation — where near-dated contracts are more expensive than later-dated ones. That compares with 56 cents at the start of last month.
OPEC+ production policy will be the main factor influencing oil prices over the coming months, according to Vitol Group. There’s little chance of Iranian barrels returning this year and U.S. shale producers aren’t investing enough to raise output quickly, Mike Muller, the head of Asia for Vitol, said on a Sunday webinar hosted by Dubai-based consultancy Gulf Intelligence.
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