Oil heads for its biggest monthly loss this year ahead of OPEC+ meet

Oil headed for the biggest monthly loss since October as investors weighed the prospect of additional OPEC+ production and the restoration of crude output in the U.S. after Hurricane Ida.

West Texas Intermediate was steady above $69 a barrel after rising 0.7% on Monday. While Gulf of Mexico crude producers are expected to gradually resume service after Ida crashed ashore in Louisiana, local refineries may be slower.

The Organization of Petroleum Exporting Countries and its allies will meet on Wednesday to assess the global market and prospects for demand as the pandemic grinds on. With expectations the hit to consumption from the delta variant will fade, they are on course to restore another 400,000 barrels a day.

Oil has endured a turbulent August, rising and falling on alternate weeks, as investors reacted to the latest twists in the global health crisis and swings in the U.S. currency. After the volatile ride, the U.S. benchmark is down more than 6% this month, even though there has been a steady draw in stockpiles and nations including key importer China managed to control their delta outbreaks.

“The tide has turned in recent weeks, with the market a lot more comfortable that the recovery in demand has not been derailed by the delta variant,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “However, the market will be watching the OPEC+ meeting for any signs they are seeing demand is not rebounding as strongly as they expected.”

Data Tuesday showed that the curbs on mobility imposed by Beijing to check the spread of the delta variant did impact the pace of growth. The official manufacturing purchasing managers’ index fell to 50.1 from 50.4 in July, slightly lower than the median estimate in a Bloomberg survey of economists.

OPEC+ has already restarted roughly 45% of the unprecedented volume shuttered last spring when the pandemic erupted. Under a plan spearheaded by Saudi Energy Minister Prince Abdulaziz bin Salman, the alliance will return the rest in monthly increments of 400,000 barrels a day through  late 2022. 

In the U.S., energy companies affected by Ida moved to restore operations. Colonial Pipeline Co. said it would restart gasoline Line 1 and diesel and jet fuel Line 2 from Texas to North Carolina on Monday evening.

Brent’s prompt timespread was $1.19 a barrel in backwardation. That’s a bullish pattern -- with near-dated prices above later-dated ones -- and compares with 64 cents a week ago.