Oil Settles High On "Diminishing Expectations" Of OPEC Opening The Taps Further

Analysts think at most the cartel will okay a minuscule uptick to appease the U.S.: File Image/Pixabay

Oil prices on Friday settled up over $2 per barrel based on what were said to be "diminishing expectations" that the Organization of the Petroleum Exporting Countries (OPEC) will boost supply when it meets next week – even though OPEC and de facto leader Saudi Arabia have persistently refused to boost output beyond agreed upon levels.

OPEC sources said the cartel will consider keeping oil output unchanged for September (this was supported by analysts saying it would be difficult for the group to boost supply anyway), and as a result Brent settled up $2.87 to $110.01 per barrel, while West Texas Intermediate settled up $2.20 to $98.62 per barrel.

John Kilduff, founding partner at Again Capital, cited other reasons for Friday trading performance: "These days, there has been a lot of macro influences on the oil market with the stock market making a nice rebound and a similar fall in the dollar feeding into [today's prices]."

Friday seemed to be dominated by analysts expressing opinions about the health of the oil market and where it was headed next: Rebecca Babin, senior energy trader at CIBC, remarked that OPEC might after all increase output very minimally, on the order of 200,000 barrels per day (bpd)  "enough, just enough to keep the U.S. at bay" after president Joe Biden's failure to come away with an oil agreement after visiting Saudi Arabia.

On the subject of the record profits big oil companies are making, Paul Sankey, lead analyst at Sankey Research, said  earnings have peaked: "I just don't see at this stage how things could get a whole lot more dramatic than they were in Q2."

With regards to demand, Amrita Sen, director of research at Energy Aspects, told media that oil has so far escaped normal recession-related declines.

She reasoned that employment numbers matter far more than a country declared to be in a technical recession, and that "We're really not seeing the oil demand declines that you would expect from a deep recessionary environment"; she added that there is also still pent up savings and demand in the wake of the pandemic, and that will continue to support high prices.

Finally on Friday, as if to preview what will likely unfold next week, it was reported that a meeting between Alexander Novak, deputy prime minister of Russia, and prince Abdulaziz bin Salman, energy minister of Saudi Arabia, resulted in both countries reaffirming their commitment to the OPEC production agreement and a stable oil market.

Saudi's energy ministry confirmed the meeting and said the officials "discussed the latest developments in the work of the Saudi-Russian joint committee, and discussed opportunities for cooperation between the two countries within its framework."