Wednesday, October 20, 2021

Oil gains on OPEC outlook that U.S. output growth will slow

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imageCommodities19 minutes ago (Jun 18, 2021 12:51PM ET)

(C) Reuters. FILE PHOTO: A crude oil tanker is seen at Qingdao Port, Shandong province, China, April 21, 2019. REUTERS/Jason Lee//File Photo

By Jessica Resnick-Ault

NEW YORK (Reuters) -Oil prices rose on Friday, reversing early losses after OPEC sources said the producer group expected limited U.S. oil output growth this year despite rising prices.

OPEC officials got the U.S. production outlook from industry experts, OPEC sources said. This would give the group more power to manage the market in the short term before a potential surge in shale output in 2022.

Brent crude futures rose 38 cents, or 0.5% to $73.47 a barrel by 12:17 p.m. (16:17 GMT). U.S. West Texas Intermediate (WTI) crude futures were up 67 cents, or 0.93% to $71.71 a barrel. Both benchmarks were on track for a weekly gain of about 1%.

“Oil markets are rallying because OPEC is skeptical that the increase in U.S. oil production is going to be enough to change their plans to support prices,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

On Wednesday, Brent settled at its highest price since April 2019, while WTI settled at its highest since October 2018. Prices retreated a bit on Thursday as the U.S. dollar strengthened, making oil more expensive in other currencies.

Sources told Reuters that on Tuesday, officials from OPEC’s Economic Commission Board (ECB) and external presenters attended a meeting focused on U.S. output. OPEC heard from more forecasters on the outlook for 2021 and 2022 at a separate meeting on Thursday.

While there was general agreement on limited U.S. supply growth this year, an industry source said for 2022 forecasts ranged from growth of 500,000 bpd to 1.3 million bpd.

“The general sentiment regarding shale was it will come back as prices go up but not super fast,” said a source at one of the companies that provided forecasts to OPEC.

Gains were capped by negative sentiment due to lingering concerns about the COVID-19 virus.

Adding to market worries were remarks from Iran’s top negotiator on Thursday saying talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement.

Weekly U.S. rig count data from energy services firm Baker Hughes was due at 1 p.m. EDT (1700 GMT).

Oil gains on OPEC outlook that U.S. output growth will slow

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