Samuel Robinson

(Bloomberg) — Oil climbed in New York as the supplies stowed at the biggest U.S. storage hub dwindled, while London-traded futures were more subdued after a report that OPEC and allied producers may lift output.

Futures in New York rose 0.7 percent on Friday, while the Brent contract was little changed. Stockpiles at a key pipeline nexus in Oklahoma are shrinking so fast that fears are growing that some tanks may bottom out. OPEC and other major exporters will meet this weekend in Algiers to consider their next move as U.S. pressure increasingly isolates the cartel’s No. 3 producer, Iran.

“Until the sanctions hit and until we actually sees what OPEC does, we’re going to have some movements like that where you have some excitement, then a little bit of a pull-back,” said Mark Watkins, who helps oversee $151 billion at U.S. Bank Wealth Management.

Oil Rises as Supplies Wane at America’s Key Inland Storage Site
Prices briefly crashed during Friday’s session when Reuters reported that the OPEC-led group was discussing a 500,000-barrel daily production increase.

U.S. sanctions have discouraged major crude buyers from purchasing Iranian cargoes, effectively shrinking available supplies. Isolating Iran may vault crude to $90 a barrel, JPMorgan Chase & Co. said.

“If Saudi Arabia doesn’t commit to substituting most of that loss, 500,000 barrels a day will not be enough to cover the market,” said Bart Melek, head commodity strategist at Toronto Dominion Bank.

The Organization of Petroleum Exporting Countries gathering in Algeria may indicate whether the group has “the barrels available to fully cover the Iranian lost output,” said John Kilduff, a partner at New York-based hedge fund Again Capital LLC.

U.S. President Donald Trump chided the cartel on Thursday, tweeting the group “must get prices down now!”

For more, listen to this mini-podcast previewing OPEC’s meeting in Algiers

West Texas Intermediate for November delivery rose 46 cents to settle at $70.78 a barrel on the New York Mercantile Exchange. Total volume traded Friday was about 50 percent above the 100-day average.

Brent for November rose 10 cents to settle at $78.80 on the ICE Futures Europe exchange. The global benchmark traded at an $8.02 premium to WTI for the same month.

OPEC and allied producers are set for another contentious meeting: Iran has threatened to veto any decision that harms its interests. Oil Minister Bijan Namdar Zanganeh said the group has no authority to impose a new supply arrangement.

Other oil-market news:

As demand for alternative Middle Eastern supplies increases, the regional Dubai crude marker has reason to strengthen. Yet it’s weakening against Brent — a very different oil grade that’s used to price barrels from Europe and Africa.
The shipping industry is pressing for a phased start for tough new rules governing vessel fuel that are scheduled to kick in less than 16 months from now.

©2018 Bloomberg L.P.

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