Oil futures headed lower on Wednesday as traders weighed conflicting reports about a potential compromise between Saudi Arabia and the United Arab Emirates on production levels.
A disagreement between the two nations had led to an abrupt end to discussions by OPEC+, the Organization of the Petroleum Exporting Countries and their allies, earlier this month without an agreement on crude production levels.
Some reports on Wednesday said the U.A.E. and Saudi Arabia had reached a compromise, but the U.A.E. has said no deal has been reached and talks are ongoing, and would need the support of other OPEC countries, according to various news reports.
Traders also parsed through U.S. weekly petroleum supply data Wednesday that were released an hour later than usual, with the Energy Information Administration citing a “technical issue” for the delay. The data revealed that domestic crude supplies fell for an eighth week in a row.
West Texas Intermediate crude for August delivery
was down 97 cents, or 1.3%, to $74.28 a barrel on the New York Mercantile Exchange. September Brent crude
the global benchmark, lost 73 cents, or 1%, at $75.76 a barrel on ICE Futures Europe.
Earlier Saudi Arabia and the United Arab Emirates reached a compromise Wednesday to lift the amount of oil the U.A.E. can pump as part of a wider OPEC+ agreement, The Wall Street Journal reported Wednesday, citing people familiar with the matter.
OPEC+ talks on a proposal to lift production by 400,000 barrels a day each month through late 2022 fell apart earlier this month after the U.A.E. insisted that its baseline should be raised from around 3.16 million barrels a day. In the compromise reportedly reached Wednesday with Saudi Arabia, the group agreed to increase that to 3.65 million barrels a day starting in April.
Some reports, however, said that in a statement, the U.A.E. energy minister denied that an agreement had been reached, and that “deliberations and consultations between concerned parties are ongoing, Reuters reported Wednesday.
If a deal has been reached, “fears of an all-out production war” would be off the table, said Phil Flynn, senior market analyst at The Price Futures Group. The lack of a deal had stirred fears of a potential free-for-all that would see U.A.E. and others abandon the deal on output curbs.
However, even if the U.A.E. is allowed to produce more barrels, the amount of oil being added to the market would probably be the “bare minimum that the market needs” to meet demand, Flynn told MarketWatch.
Matt Smith, director of commodity research at ClipperData, said that if the U.A.E. “does get a re-basing of its production level, which is a reasonable request, OPEC+ is still going to be maintaining its efforts to gradually increase supply to meet rising demand.”
Given that, “in theory, it shouldn’t have too much of an influence on current prices. It will just influence the calculations of OPEC+ going forward, said Smith.
Meanwhile, after an hour’s delay, with the Energy Information Administration citing a “technical issue,” the U.S. government reported that U.S. crude inventories fell by 7.9 million barrels for the week ended July 9, marking an eighth weekly decline in a row.
On average, analysts polled by S&P Global Platts forecast a decline of 4.9 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported a 4.1 million-barrel decrease.
Crude supplies fell to their lowest since January 2020 amid “ongoing strength in refinery runs and exports,” said Smith. “Implied gasoline demand has dropped off considerably, resulting in build to gasoline inventories, while distillates continue their seasonal march higher.”
Gasoline supplies climbed by 1 million barrels, while distillate stockpiles rose by 3.7 million barrels for the week, the EIA reported. The S&P Global Platts survey forecast a supply fall of 1.6 million barrels for gasoline and an inventory climb of 1.3 million barrels for distillates.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub declined by 1.5 million barrels for the week.
August natural gas
fell 1% to $3.66 per million British thermal units.