Oil Pares Decline Amid Nigerian Pipe Cracks, Growing OPEC Schism

LAGOS (Capital Markets in Africa) – Crude pared losses as cracks in a key pipeline threatened Nigerian oil exports and a schism deepened within OPEC over whether to allow more crude to flow onto global markets.

Futures erased a 1.4 percent loss in New York on Monday. New leaks have been discovered in a Nigerian pipeline that’s been shut since late last week and the operator provided no estimate for when deliveries will resume. Meanwhile, Iraqjoined Iran and Venezuela in panning Saudi Arabian suggestions that it’s time to unwind output caps that eroded a worldwide supply glut.

The Nigerian outage involves “a big pipe, big delivery point,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. At the same time, any signals that major producers like the Saudis are boosting output are “going to tend to weigh on the market.”

The self-discipline of the OPEC-led coalition that adopted historic supply restraints in early 2017 may already be slipping. Russia lifted crude output140,000 barrels a day above its cap in the first week of June, according to a person with knowledge of the matter.

Russia and the Saudi kingdom are set to formally propose a gradual production increase when the Organization of Petroleum Exporting Countries and allies gather in Vienna on June 22-23.

“OPEC-led cuts have acted as an important pillar of price support in recent months and any relaxation in supply curbs will inevitably weigh on prices,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.

West Texas Intermediate crude for July delivery rose 3 cents to $65.77 a barrel at 10:49 a.m. on the New York Mercantile Exchange. Total volume traded was about 23 percent below the 100-day average.

Brent futures for August settlement dropped 22 cents to $76.24 on the London-based ICE Futures Europe exchange, and traded at a $10.72 premium to WTI for the same month.

OPEC and allied producers haven’t reached their objectives and shouldn’t be influenced by calls to pump more oil, Iraqi Oil Minister Jabbar al-Luaibi said.

Source: Bloomberg Business News