Oil prices close higher on OPEC decision devoid of drama

(Bloomberg) --U.S. crude futures closed modestly higher after OPEC+’s relatively harmonious decision to gradually raise supply and a bullish U.S. oil inventory report. 

Futures erased intraday losses to climb 0.1% as OPEC and allied partners appeared to rubber stamp a previously announced hike of 400,000 barrels a day. The drama-free meeting was a welcome sign of unity after July’s tiff between Saudi Arabia and the United Arab Emirates left the market waiting for days on a decision. A U.S. government report showed crude stocks fell more than expected and petroleum products demand rose to a record high.

“The declines are getting erased because the market is putting more emphasis on the bullish report rather than the OPEC+ announcement which was anticipated,” said John Kilduff, a partner at Again Capital LLC. That the group made a decision in “record time” is a sign that past divisions have given way to unity, he added.

After rallying in the first half, crude’s surge stalled over the past two months amid concern about the spread of the delta variant. OPEC+ has been gradually restoring the supply it took offline last year as the pandemic broke out, crushing consumption. The alliance projects that global inventories will continue to drop this year even as it loosens the taps.

Prices:

• WTI for October delivery gained 9 cents to settle at $68.59 a barrel in New York.
• Brent for November settlement slipped 4 cents to $71.59.

U.S. crude inventories declined by 7.2 million barrels last week, according to Energy Information Administration data, a larger drop than had been reported by the industry-funded American Petroleum Institute. Meanwhile, total oil products supplied, a proxy for demand, rose to its highest in data going back to 1990, the EIA report showed. Gains in propane, jet fuel, gasoline and diesel helped push this number to the record.

The crude draw surpassed expectations despite Gulf Coast refineries shutting in preparation for Hurricane Ida. “Crude stocks would have drawn even more if it wasn’t for the refiner shut-ins,” said Quinn Kiley, portfolio manager at Tortoise.