Crude edges higher as market eyes OPEC+ meeting, rising delta variant

Crude oil futures edged higher June 29 as the market looked to a July 1 meeting of OPEC and its allies for signs of next direction, with rising cases of the delta coronavirus variant creating a headwind against demand.

NYMEX August WTI settled 7 cents higher at $72.98/b, and ICE August Brent finished up 8 cents at $74.76/b.

The meeting of OPEC+ ministers on July 1 to decide July and August production rates comes as the market anticipates a production increase of around 440,000 b/d in July, and as some analysts expect the group to announce a production increase of around 500,000-1 million b/d for August, putting pressure on prices.

The June 29 meeting of the OPEC joint technical committee could provide some early indication regarding the group's plans, analysts said.

NYMEX July RBOB climbed 2.24 cents to $2.2390/gal and July ULSD was up 37 points to settle at $2.1219/gal.

"The global oil market is tightening at a frantic pace and the big question is, will OPEC+ rise to the occasion and save the world from an oil price spike?" Price Futures Group analyst Phil Flynn said in a note. "The reality is that the global oil market is facing a looming supply deficit."

The front-month ICE New York Harbor RBOB crack versus Brent rallied to $19.30/b in afternoon trading, up from a June 28 close of $18.46/b.

Oil prices were lower overnight as rising cases of the coronavirus, in particular the delta variant, pressured demand outlooks. The rise in cases threatens to stall or potentially even reverse the easing of travel restrictions, and hence oil demand in some regions, analysts said.

The UK reported 22,723 new coronavirus cases June 28 despite the number of total COVID-19 vaccine doses administered rising steeply, while a flare-up in cases in Southeast Asia led to Indonesia reporting 20,690 new cases and 423 new deaths, according to data from John Hopkins University.

Despite daily case rates showing a downward trend in India, higher crude oil prices, transport restrictions and taxes have driven up pump prices for diesel and gasoline, making driving unaffordable and threatening to stunt demand for oil in the world's third-largest consumer, Eugen Weinberg, head of commodities research at Commerzbank, said in a daily note.

While not solely responsible for the weakening prices, the rising coronavirus cases did help "flush out some weak length," PVM analyst Tamas Varga said in a separate note, with Commerzbank's Weinberg adding that the declining net long positions in ICE Brent and WTI reflected the fact that all the bullish news was already priced in.