WTI Futures on Track for 10% Weekly Gain on Shut-ins, OPEC+

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange traded on either side of Thursday's settlement early Friday, with West Texas Intermediate October futures in position for a 10% gain this week, as traders assess the impact on offshore oil production in the U.S. Gulf of Mexico from Hurricane Sally while an upgraded Tropical Depression 22 is on track to further menace offshore production in the Gulf waters.

Oil futures were also buoyed by a recommitment to supply cuts by the Organization of the Petroleum Exporting Countries and allied partners, with OPEC+ compliance with their production agreement at 102% in August. Countries producing above their quota were given until the end of the year to meet their commitment.

"I'm going to make sure whoever gambles on this market will be ouching like hell," said Saudi Arabia energy minister Prince Abdul-Aziz Bin Salman during a news conference when asked about OPEC+'s next steps to counter an oversupplied global oil market.

Thursday's Joint Ministerial Monitoring Committee meeting concluded without recommendations for volume adjustments to the current 7.7 million barrels per day (bpd) but called on laggard members of the joint agreement to live up to their pledged quotas. Nigeria, Iraq and United Arab Emirates among others have until the end of December to compensate for an estimated 2.375 million bpd in overproduced volumes from May through July.

"Repeated promises that are not carried through in a timely fashion may have temporary positive impact, but if these are not delivered, they can come back to bite us all," said the prince.

Market participants welcomed the strong language coming the cartel's de facto leader Saudi Arabia as it tries to bring discipline to the producer group in meeting terms of their agreement. The price's strong language followed reports ahead of this week's JMMC meeting that Iraq, the second largest producer within OPEC, plans to quit the deal altogether starting in 2021, while the United Arab Emirates, a close Saudi ally, overproduced its August target.

WTI October futures jumped to a two-week $40.97 per barrel (bbl) settlement on Thursday, while straddling the settlement early Friday. The international crude benchmark Brent contract with November delivery slipped below $43 bbl early Friday after trading at $43.80 overnight. NYMEX ULSD October futures reversed from a $1.1713 two-week high to trade down 1.05 cents early Friday, with the October RBOB contract down about 0.5 cents after reversing from a $1.2350 overnight high.

Traders will pay close attention to the latest reading on U.S. consumer sentiment due out 10:00 a.m. ET, with consensus calling for a slight improvement to a 75.0 in August. High-frequency economic indicators suggest however, consumer sentiment likely took a hit from stalled stimulus talks in Washington, D.C., and the expiration of $600 per week federal supplement to state unemployment aid. Slowing retail sales growth in August and high unemployment rates amid the pandemic are likely to pressure consumers' outlook through the end of the year.

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

Liubov Georges