Opec+ struggles to meet its supply targets amid high crude prices

As President Biden prepares to go to Saudi Arabia in July, Opec+ members say the cartel and its allies have fallen far behind on their oil-production targets and are in their weakest position in recent years to help tame high crude prices.

Oil rallied for a fourth day as a government report showed US stockpiles dropped last week, exacerbating global supply concerns with shipments from Libyan ports suspended. Brent crude futures for August were little changed at $117.9 a barrel by 09.17 GMT. The August contract will expire on Thursday and the more-active September contract was at $114.06, up 23 cents, or 0.2 per cent. West Texas Intermediate rose as much as 2.4 per cent to trade near $114 a barrel. US crude stockpiles fell 2.76 million barrels last week, according to an Energy Information Administration report Wednesday. Inventories at Cushing, Oklahoma, the largest storage hub in the US, fell to the lowest since October 2014. Data for two weeks was released simultaneously after an outage last week. 

Compounding market tightness, Libya’s state oil company suspended shipments from two key eastern ports, while Iranian media said talks to revive a nuclear deal that could boost the country’s supply ended Wednesday with little effect.  Those curbs to supply come as Shell Plc said spare energy production capacity is running very low, and the company’s chief executive officer painted a bleak picture of the global energy supply.

Global oil markets have tightened after a rebound in economic activity, with Russia’s invasion of Ukraine exacerbating the squeeze by upending trade flows. Opec+ is expected to rubber-stamp another modest supply increase for August, although the cartel has struggled to meet its targets this year.

Oil is heading for the first monthly decline since November after being hit by fears of a global economic slowdown, but prices still are about 50% higher this year. While fears of a global economic slowdown have weighed on futures, demand remains robust for now. US retail gasoline prices remain near record highs, causing pain for consumers. 

A recovery from Covid-19 and a shortage of refining capacity to make fuels continue to keep prices at record highs. 

Time-spreads that help gauge market health are also flashing bullish signs, while a price marker for Middle Eastern barrels has surged to a record.