Crude oil futures were higher in mid-morning Asian trade June 1 as investors looked past recent bearish reports of Russia being excluded from an OPEC+ production deal to refocus back on an oil market that remained severely undersupplied.
At 10:40 am Singapore time (0240 GMT), the ICE August Brent futures contract was up 50 cents/b (0.43%) from the previous close at $116.10/b, while the NYMEX July light sweet crude contract rose 59 cents/b (0.51%) at $115.26/b.
Oil prices endured a rollercoaster ride in the May 31 session, with the ICE Brent August contract initially surging by more than $3/b after the European Union agreed late May 30 to ban seaborne Russian oil imports.
The contract later gave up all its gains to end the day lower on media reports citing OPEC delegates stating Russia may be exempted from production targets under the so-called OPEC+ group, paving the way for other members to potentially raise output.
The group is slated to meet June 2 to discuss its July production targets, and most market watchers had expected it to maintain its path of gradually winding down its output cuts in 432,000 b/d monthly increments.
“Overnight, oil prices took a breather after hitting resistance at the $120 per barrel mark, as some discussions among OPEC members to exempt Russia from its oil-producing targets may open up the possibility of increased supplies from other major oil producers,” IG market strategist Yeap Jun Rong said in a June 1 note.
“That said, it seems that the demand-supply imbalance will be here to stay, with recent moves from EU and China’s economic reopening all likely to point towards energy costs staying higher for longer,” he added.
Analysts said the move will likely have little impact as many OPEC members remained incapable of raising output due to lack of investment or domestic instability, regardless of whether Russia is included in production targets or not.
“In reality, given that most members have failed to hit their output targets consistently for several months, it will likely be a struggle for the group as a whole to increase output more aggressively,” ING analysts Warren Patterson and Wenyu Yao said.
An already undersupplied oil market is set to tighten further with China loosening some of its COVID-19 movement restrictions.
Shanghai on June 1 finally emerged from its two-month lockdown. While almost all restrictions in the city have been lifted, residents must get tested every 72 hours to take public transport or enter public venues, while positive cases will still have to undergo quarantine.
Beijing has also eased some restrictions in recent days, though many facilities remained closed and dining at restaurants was not allowed.
Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia June 1 from the previous close.
The August Dubai swap was pegged at $105.29/b at 10 am Singapore time (0200 GMT), down $2.91/b (2.69%) from the May 31 Asian market close.
The July-August Dubai intermonth swap spread was pegged at $2.65/b at 10 am, down 27 cents/b over the same period, while August-September intermonth spread was pegged at $2.30/b, down 15 cents/b.
The August Brent-Dubai EFS was pegged at $11.15/b, down 55 cents/b.
Source: Spglobal.com
