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Futures Movers: Oil prices end at a more than a 1-week low on demand concerns, OPEC+ output uncertainty

Oil futures mark their lowest finish in more than a week on Monday, pulling back after a recent rise to their highest levels since October 2018, as traders await this week's OPEC+ decision on production levels. Read More...

Oil futures marked their lowest finish in more than a week on Monday, pulling back after a recent rise to their highest levels since October 2018.

Concerns that the spread of a COVID variant in Europe and Austria will lead to less travel, easing demand for fuel, put pressure on oil prices, as traders awaited a decision this week by the Organization of the Petroleum Exporting Countries and its allies on crude production levels.

The group of producers, known as OPEC+, will hold technical meetings on Tuesday and Wednesday to review the oil market, ahead of official meetings of OPEC, as well as the wider OPEC+ group, on Thursday via videoconference that are expected to result in a decision on production. 

Read: More ‘wiggle room’ for OPEC+ allows oil producers to mull an output hike without pressuring prices

S&P Global Platts Analytics views an August quota increase of 500,000 barrels per day as the “most probable outcome” of the July 1 OPEC+ meeting, said Paul Sheldon, chief geopolitical adviser, political risk and oil supply analytics, at S&P Global Platts, in emailed commentary. “Saudi caution over both global demand uncertainty and Iran nuclear talks will likely prevent a larger commitment, until the next meeting in early August.”

West Texas Intermediate crude for August delivery CL00, -1.61% CLQ21, -1.61% fell $1.14, or 1.5%, to settle at $72.91 a barrel on the New York Mercantile Exchange.

September Brent crude BRN00, -0.07%, the most actively traded contract for the global crude benchmark, fell $1.24, or 1.6%, at $74.14 a barrel on ICE Futures Europe. August Brent crude BRNQ21, -0.07%, which expires at the end of Wednesday’s trading session, fell $1.50, or 2%, to $74.68 a barrel.

Front-month WTI and Brent crude marked their lowest settlements since June 18, according to Dow Jones Market Data.

Read: Halfway through the year, steel, ethanol lead the rise in commodities prices

With Brent in the mid-$70/b range, a 500,000 barrel-per-day quota increase would “demonstrate sensitivity to the fragile demand recovery,” said Sheldon.

Platts Analytics expects that size of a quota increase to be “bullish, even with risk of some 1.8 million barrels of noncompliance,” because OPEC needs to “either add some additional volume for August or increase the quota by 1 million barrels,” he said.

In early April, OPEC+ agreed to gradually rollback previous output cuts from May through July. Saudi Arabia also said it would ease the voluntary cuts the kingdom had been making since February. OPEC+ had been holding back roughly 8 million barrels a day of output at the time, 1 million of which represented the Saudis’ voluntary cut.

Meanwhile, China said it plans to raise retail prices of gasoline and diesel starting Tuesday, according to a report from Xinhua, citing the National Development and Reform Commission.

Oil prices dipped in the wake of the report, as it marks China’s “latest attempt to control commodity prices,” said Phil Flynn, senior market analyst at The Price Futures Group.

Traders were also keeping tabs on COVID-19 cases, with concerns that the spread will hurt demand for travel — and fuel consumption along with it.

There’s a “resurgence in COVID-19 fears as case counts are rising sharply in parts of Asia, while the ‘Delta variant’ of the virus is stoking concerns that the reopening process in Europe will stall, or even take a step backwards this summer,” said Tyler Richey, co-editor at Sevens Report Research. That would be negative for the consumer demand outlook for refined products and, ultimately, oil prices, he said.

Australia was battling to contain several COVID-19 clusters around the country, with experts warning that the country was facing the most dangerous days since the early stages of the pandemic.

On Monday, July gasoline RBN21, -1.97% shed 2.1% to $2.22 a gallon and July heating oil HON21, -1.27% lost nearly 1.5% to $2.12 a gallon.

The July natural gas contract NGN21, +3.18%, which expired at the end of the day’s session, tacked on 3.5% to nearly $3.62 per million British thermal units. Prices based on the front month logged the highest settlement since late December 2018.

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