Oil Gains After OPEC+ Forecasts Tightening Market Before Meeting

(Bloomberg) — Oil climbed past $67 a barrel after the OPEC+ alliance forecast a tightening global market ahead of a production policy meeting.

Futures in New York rose around 1% from Friday after there was no settlement on Monday due to a U.S. holiday. An OPEC+ committee predicted that the oil glut built up during the Covid-19 pandemic has almost gone, and that stockpiles will diminish rapidly in the second half of the year. The coalition is expected to ratify a scheduled output increase in July when it meets later on Tuesday.

A robust recovery in the U.S. and Europe has given OPEC+ the confidence that global markets can absorb any additional barrels, despite a Covid-19 comeback in parts of Asia and the prospect of more supply from Iran should a nuclear deal be revived. OPEC’s Joint Technical Committee forecast stockpiles will fall by at least 2 million barrels a day from September through December.

Iran’s comeback “will occur in an orderly and transparent fashion,” causing no upset to the stability that other OPEC+ nations have toiled to achieve, OPEC Secretary-General Mohammad Barkindo said at the Monday meeting.

The prompt timespread for Brent was 37 cents in backwardation — a bullish structure where near-dated prices are more expensive than later-dated ones. That compares with 9 cents at the start of last week.

Asian refiners, meanwhile, are grappling with what’s expected to be a brief period of weak profits amid the demand-sapping virus resurgence. Complex refining margins in Singapore, a proxy for the region, have slumped since the end of April, but accelerating vaccination rates are expected to aid demand.

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