Crude oil futures steady as OPEC+ resolution nears, demand forecasts remain robust

0326 GMT: Crude oil futures were steady during mid-morning Asian trade July 16, as increased certainty over the OPEC+ supply accord and robust demand projections from OPEC analysts arrested the plunge in oil prices thus far this week.

At 11:26 am Singapore time (0326 GMT), the ICE September Brent crude futures contract rose 2 cents/b (0.03%) from the previous close at $73.49/b, while the NYMEX August light sweet crude contract was up 4 cents/b (0.06%) at $71.69/b. The front month ICE Brent and NYMEX light sweet crude markers had fallen 3.94% and and 4.78% over July 13-15.

Reports have emerged that the impasse between the UAE and Saudi Arabia is on the verge of a resolution. Tensions between the two members of OPEC+, a coalition of OPEC and other oil producers, had flared after the UAE had objected to Saudi Arabia's plan to tie OPEC+ production increases to a lengthening of the supply management pact, insisting that its baseline production level, from which its quota is determined, be raised first.

Negotiations between the two seem to be heading towards an upward revision of the UAE's baseline production to 3.65 million b/d, from the current 3.168 million b/d, although this figure has yet to be ratified by other OPEC+ members.

"Progress in talks between the UAE and Saudi Arabia has raised hopes that a full resolution is not too far off, and that the alliance can soon get around to raising their production quotas by 400,000 b/d in August, and if not, September onward," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts July 16.

Hari added that, as the likelihood of an OPEC+ agreement has increased, the possibility of the worst case scenario of an implosion of the alliance has declined.

"I think that OPEC+ members in general remain committed to making the coalition's supply pact work, and that they may not necessarily follow the UAE in demanding an increase in their baseline production levels as they will be quite aware that doing so carries the risk of jeopardizing cohesion," she said.

The market also received some assurance from OPEC's July 15 monthly oil market report, in which OPEC analysts have kept their 2021 forecast for oil demand at 96.58 million b/d, up 5.95 million b/d from 2020.

Furthermore, OPEC's analysts see demand growing by another 3.28 million b/d to 99.86 million b/d in 2022, expecting demand to top the 100 million b/d mark in the second half of the year.

OPEC's robust demand outlook comes despite the spread of the more transmissible Delta variant of the coronavirus.

"The market is not currently focused on the spread of the Delta variant as despite causing a rise in COVID-19 infections, it is so far not causing major surge in hospitalizations and deaths in the vaccinated regions," Hari said.