DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange backed off three-year highs after the Organization of the Petroleum Exporting Countries, Russia and allied partners delayed their ministerial meeting until Friday morning in order to hold additional talks on their production policy. The United Arab Emirates reportedly was objecting to the plan to increase output from the current baseline and extend the agreement through 2022.

Although oil futures faded a portion of earlier gains in market-on-close trade Thursday, both WTI and Brent settled the session 1.5% higher as the market still expects a deal to be announced at some point on Friday. NYMEX August West Texas Intermediate settled $1.76 higher at $75.23 barrel (bbl) after trading at a $76.22 three-year high on the spot continuous chart earlier in the session. ICE September Brent crude futures advanced $1.22 for a $75.84 bbl settlement after the international crude benchmark traded at a $76.74 high.

NYMEX August RBOB futures rallied 2.58 cents to $2.2676 gallon, with front-month ULSD futures surging 2.79 cents for a $2.1562 gallon settlement.

The OPEC+ ministerial meeting was postponed until Friday after an apparent disagreement emerged between Saudi Arabia and the United Arab Emirates on the size and baseline for production cuts. Preliminary reports, citing sources close with negotiations, suggest UAE seeks to increase its baseline from which production cuts would be subtracted to 3.8 million barrels per day (bpd) from the current reference output rate of 3.168 million bpd. In May, the country's crude production averaged 2.7 million bpd, according to secondary sources cited by OPEC, slightly more than its 2.659 million bpd quota for the month. UAE's production quota for July is 2.735 million bpd, reflecting a cut from the current reference baseline of 433,000 bpd.

Earlier reports indicated the group was considering a monthly cut of 400,000 bpd from August to December, gradually bringing back 2 million bpd of shut-in output later this year. OPEC+ agreed to cuts for July stand at 5.759 million bpd.

If agreed, the outlined arrangement would keep the market tight this summer, with demand projected to increase between 5 million and 6 million bpd in the third and fourth quarters. OPEC+ economists forecast current supply shortfall to stand at 1.5 million bpd and likely to be expanded to 2.2 million bpd in the fourth quarter, should the group maintain its policy of gradual production increases.

Liubov Georges can be reached at liubov.georges@dtn.com