WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended lower in early trade Thursday, with the U.S. crude benchmark falling below $72 per barrel (bbl) on growing signs of disunity within the OPEC+ alliance after the United Arab Emirates demand for an increase in its production quota faced resistance from Saudi Arabia, blocking plans to lift production in August, with Russia reportedly working behind the scenes to rescue a deal.
Russian energy minister Alexander Novak is reportedly leading efforts to bring Saudi Arabia and the UAE back to the negotiating table, with a prolonged stalemate between the two OPEC producers raising the risk of other members within the alliance abandoning their quotas. OPEC+ in the existing deal, which runs through April 2022, is withholding about 5.7 million barrels per day (bpd) in production.
Russian officials have said not raising production in August is unacceptable for Moscow, while Iraq's representative said they had hoped for the new meeting to take place within next 10 days.
There have been mixed signals from Saudi Arabia and the UAE this week, with the former raising its official selling prices for Asian, U.S. and European buyers, suggesting the kingdom has no appetite for a full-blown price war. At the same time, Riyadh beefed up import duties on all cargoes originated from Gulf Cooperation Council countries, including the UAE, Qatar, Oman, Kuwait, and Bahrain. The new customs regime largely targets the UAE economy and sales from its major bunkering hub at Fujairah. Analysts said Saudi's latest move points to a deepening rift between the two regional rivals, with both competing for international investments and resource development.
OPEC+ disagreement comes as a highly contagious Delta variant of coronavirus has become the dominant strain in the United States, accounting for more than 51% of COVID-19 infections nationwide, according to new estimates released by the Centers for Disease Control and Prevention. In some parts of the country, the Delta strain accounts for more than 80% of new infections, including some Midwestern states such as Missouri, Kansas, and Iowa.
The variant, also known as B.1.617.2, was first detected in India and is spreading quickly across the globe, undermining efforts to reopen international travel. In the European Union, a growing number of countries are tightening travel restrictions in line with recommendations from the European Centre for Disease Prevention and Control.
"Based on available scientific evidence, the Delta variant is 60% more transmissible than other circulating variants, and we estimate that by the end of August, it will represent 90% of all SARS-CoV-2 viruses circulating in the European Union," ECDC's Director Andrea Ammon said.
Limiting losses for the oil complex, the American Petroleum Institute reported late afternoon Wednesday U.S. crude oil stockpiles declined for the seventh consecutive week through July 2, while also detailing a larger-than-expected draw in domestic gasoline supplies accompanied with a build in distillate fuel inventories. Data showed commercial crude stocks plunged 7.983 million bbl, more than double calls for a 3.9 million bbl draw while stocks at the Cushing, Oklahoma hub added 152,000 bbl. Gasoline stockpiles erased the prior week build, falling 2.763 million bbl from the previous week. This compares with expectations for a 2.1 million bbl draw. Distillate inventories rose 1.086 million bbl, more than three times the market's projected 300,000 bbl gain.
Energy Information Administration will release its inventory data at 11 a.m. ET.
In early trading, NYMEX August West Texas Intermediate futures declined $0.80 to $71.40 bbl and the international crude benchmark Brent contract for September delivery is down $0.64 to $72.79 bbl. NYMEX August RBOB futures fell 1.59 cents to $2.1901 gallon, and August ULSD futures declined 2.01 cents to $2.0687 gallon.
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