Oil reversed its initial decline after US President Joe Biden wrapped up a historic visit to the Middle East without a firm commitment from major producer Saudi Arabia to boost crude supplies.
Texas Intermediate edged closer to $99 a barrel after falling nearly 7 percent last week as investors said a global slowdown could hurt demand and the dollar broke records. While US energy envoy Amos Hochstein said he was confident that Persian Gulf producers would increase production after a visit to Saudi Arabia, local ministers stressed that policy decisions would be taken according to market logic and within the OPEC+ alliance, A group that includes Russia.
Crude oil has declined since mid-June as concerns about a possible slowdown rippling through commodity markets, eroding gains following Russia’s invasion of Ukraine. While the decline has been a boost for the US administration, Biden is eager to add supplies to the Organization of the Petroleum Exporting Countries to help bring prices further down and tame inflation. OPEC and its allies, including Russia, will next meet on August 3, when members agreed to revive crude oil supplies stalled during the coronavirus pandemic.
“The OPEC Plus quota system expires in September and the focus is now on what happens next,” said Stephen Innes, managing partner at SPI Asset Management. “I wouldn’t be surprised to see something packed away at or even before the end of the OPEC September agreement, which could allow people with excess capacity to touch their quota and declare Biden a victory.”
While futures have declined in recent weeks, the market remains firmly in backwardation, a bullish pattern that is trading near-term prices above the longer-term. Brent’s early spread — the difference between its two nearest contracts — was up about $4 a barrel, up from $2.73 a month earlier.
Oil gained momentum on Monday as the dollar declined slightly. After hitting a record last week, the Bloomberg dollar spot index traded 0.2% lower, making raw material prices in the greenback cheaper for holders of other currencies. Other commodities including copper also rose.
Investors also focused on the return of raw materials from Libya. Prime Minister Abdul Hamid Dabibah said the country’s exports are on track to fully resume after months of shutdown as he justified his replacement of leadership at state-run oil company National Oil Corp.
Meanwhile, in India, gasoline and diesel sales during the first half of July fell from the previous month as seasonal rains cut demand from the third-largest energy consumer. The drop was the first monthly decline in three months.