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Oil Up, OPEC+ Delays Talks Ahead of Production Policy Meeting

Oil was up Wednesday morning in Asia after the Organization of the Petroleum Exporting Countries and allies (OPEC+) delayed talks ahead of its ministerial meeting to discuss production policy, taking place on Thursday.

Brent oil futures rose 0.61% to $74.73 by 10:39 PM ET (2:39 AM GMT) and WTI futures jumped 0.69% to $73.48.

Some OPEC+ members including Russia suggested increasing the oil supply while Saudi Arabia was concerned about the global spread of the COVID-19 delta variant despite the growing demand. The cartel delayed its preliminary talks to Friday to allow for more time to resolve differences.

OPEC Secretary-General Mohammad Barkindo was optimistic about the market at the OPEC+ Joint Technical Committee meeting on Tuesday, but cautioned that it “not completely out of the woods yet.” The group is expected to revive some of the supplies it halted when demand decreased thanks to the spread of COVID-19 in 2020, with investors expecting an increase of 550,000 barrels a day.

Even if OPEC+ boosts supply by more than expected, it will not reach inventories in time to alleviate the tight market, Goldman Sachs Group Inc (NYSE:GS) analysts including Damien Courvalin and Jeff Currie said in a report.

“Ultimately, much more OPEC+ supply will be needed to balance the oil market by 2022,” they added.

Other investors now await the outcome of the OPEC+ ministerial meeting.

“We’ll see the trading continue to be choppy until Thursday when the actual meeting is held and we get the official decision,” Rebecca Babin, senior energy trader at CIBC Private Wealth Management, told Bloomberg.

On the supply front, U.S. crude oil supply data from the American Petroleum Institute showed a draw of 8.153 million for the week ending Jun. 25. Forecasts prepared by predicted a 4.460 million-barrel draw, while a 7.199 million-barrel draw was recorded during the previous week.

Crude oil supply data from the U.S. Energy Information Administration is due later in the day.

Oil prices have surged about 50% in 2021 as fuel demand rebounded in key markets such as the U.S. and China thanks to their ongoing economic recovery from COVID-19. However, the recent spread of the COVID-19 delta variant weighed on the demand recovery.

“The delta variant will continue to be in the background and potentially keep the commodity from exploding higher,” said Babin.

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