DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled shallowly mixed following choppy trading. Officials with the Organization of the Petroleum Exporting Countries, Russia and nine additional oil-producing countries haggled over production quotas, while RBOB and ULSD futures rallied ahead of the July Fourth holiday weekend.

Late Friday afternoon, OPEC+ adjourned the 18th OPEC and non-OPEC Ministerial Meeting until Monday, while the Joint Ministerial Monitoring Committee concluded their meeting Friday afternoon without resolution to an objection by the United Arab Emirates for a second day. UAE wants the baseline from which its production cuts are referenced against to be substantially higher before agreeing to extending the current two-year OPEC+ accord beyond April 2022. OPEC+ was expected to extend its production agreement through December 2022, with an agreement between Saudi Arabia and Russia ahead of the video conference gathering to lift monthly output by 400,000 barrels per day (bpd) from August through December.

Wire services indicate most OPEC+ members still favor the proposed deal, although a growing number of producers oppose the extension through the end of 2022. Mexico's energy minister, Rocio Nahle Garcia, reportedly joined delegates from the UAE in their request to review the April 2020 production agreement every two to three months.

The discord followed UAE's request to lift its production baseline from the current 3.168 million bpd to 3.85 million, with the Gulf State having invested heavily to expand its crude output capacity. UAE production averaged 2.7 million bpd in May, according to the most recent OPEC Monthly Oil Market Report, slightly higher than its 2.659 million bpd quota for the month.

UAE's objection is not new, with the Emirate in December complaining about the low reference baseline, suggesting the issue will continue to drag on any potential agreement until resolved. Failure by OPEC+ to reach an agreement would suggest no additional production increases after July, when OPEC+ lifts output by 441,000 bpd, leaving 5.759 million bpd in cuts. The inability to reach an agreement could, however, prompt cheating on quotas.

In financial markets, U.S equities rallied, and the dollar lost ground to finish at 92.413 after the Labor Department's Nonfarm Employment report showed the U.S. economy added 850,000 new jobs in June, above expectations for a 675,000 increase, while the unemployment rate ticked 0.1% higher to 5.9%. Leisure and hospitality industries once again drove gains in nationwide employment with 343,000 new jobs created last month as pandemic-related restrictions continued to ease, followed by local government and state government education, up 155,000 and 75,000, respectively. Employment in manufacturing and transportation was little changed in June.

Oil traders returning from the July Fourth holiday weekend will also need to monitor Hurricane Elsa, which strengthened significantly on Friday with a heading toward the Florida coastline early next week. DTN Weather forecasts Elsa's intensity to strengthen further as it progresses into a more favorable tropical environment over the next two days.

On the session, NYMEX August WTI settled down $0.07 at $75.16 per barrel (bbl) after trading at a $76.22 33-month high on the spot continuous chart on Thursday. ICE September Brent crude futures edged $0.33 higher to $76.17 per bbl, fading from Thursday's $76.74 33-month spot high. NYMEX August RBOB futures advanced 3.22 cents to $2.2998 gallon, with front-month ULSD futures gaining 2.29 cents for a $2.1791-per-gallon settlement.

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