WTI, Brent Futures Gain Ahead of Stock Data, OPEC Meeting

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session mostly higher. The gains followed reports the Saudi-led Organization of Petroleum Exporting Countries and 10 producers outside the cartel are considering either a modest production increase or freezing crude output at current levels when oil ministers meet Wednesday as the group grapples with an accelerated slowdown in major global economies.

Wednesday's OPEC+ meeting follows the end of historic production cuts introduced in April 2020 in response to the global pandemic, which are now fully unwound as OPEC+ members return the final 648,000 barrels per day (bpd) of the reduction this month. However, Reuters' survey showed OPEC producers continued to underproduce their quota in July, with output by the 13-member cartel at 28.98 million bpd last month, which represents an increase of 310,000 bpd or just 60% of the production target allotted for the month.

Nonetheless, Reuters, citing sources familiar with negotiations, reported OPEC+ delegates are considering a modest boost to a joint production target of 43.85 million bpd. Others indicate output increase is highly unlikely.

OPEC+ Joint Technical Committee made no recommendation on Tuesday to raise production targets for September, but it lowered its global surplus forecast by 200,000 bpd this year to 800,000 bpd.

Underlying Tuesday's volatile trade are concerns U.S. House Speaker Nancy Pelosi's visit to Taiwan will escalate tensions between the United States and China and potentially reverberate beyond those bilateral relations. Beijing called Pelosi's arrival in Taiwan a "serious crush to political foundations" between China and the United States.

In reaction to Pelosi's visit, Beijing is reportedly preparing "targeted" military actions against what it called "Taiwan independence" separatist forces. It was not immediately confirmed by official Beijing, but reports suggest the Chinese Navy is currently encircling Taiwan to conduct missile tests.

The White House attempted to ease tensions with China with National Security Council spokesperson John Kirby telling reporters on Monday that the United States does not "support Taiwan independence."

"Nothing has changed about our 'One China Policy.' We have repeatedly said that we oppose any unilateral changes to the status quo from either side," Kirby added.

Taiwan has governed independently from mainland China since 1949, but Beijing considers the island as part of its territory. Beijing has vowed to eventually "unify" Taiwan with the mainland. The United States has maintained a "One China Policy" since 1979.

Markets are clearly spooked by the sudden escalation in tensions over Taiwan that could reignite trade wars and a potential conflict in the South China Sea. Dow Jones Industrials retreated 402 points on Tuesday to close at 32,396, while S&P 500 Index fell 0.67% into the red, with the tech-stock heavy Nasdaq declined 0.16%.

In oil futures trade, West Texas Intermediate slipped $0.53 to settle at $94.42 per barrel (bbl), with the international crude benchmark Brent contract for October delivery gaining to $100.54 per bbl. NYMEX September RBOB advanced 5.86 cents to $3.0567 per gallon, while NYMEX September ULSD contract slid 5.96 cents to $3.3804 per gallon.

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

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

Liubov Georges