Crude higher on Europe's vulnerability to supply, Saudi's commitment to OPEC+

Crude futures were higher during mid-afternoon trading in Asia July 18 on the back of investors weighing Europe's vulnerability to oil and gas supplies during the upcoming heating season and Saudi Arabia's new commitment to OPEC+ following the visit of US President Joe Biden to the country.

The September ICE Brent futures contract rose $2.83/b, or 2.80%, from the previous close to $103.99/b at 3:35 pm Singapore time (0735 GMT) July 18, while the NYMEX August light sweet crude contract was up $2.66/b, or 2.73%, at $100.25/b.

Biden recently concluded his visit to Saudi Arabia to push for increased oil production from Saudi Arabia in a bid to tame high oil prices and ongoing high inflation, with no public announcement of an oil supply.

"Biden emerged confident that Saudi Arabia and the UAE would pump more oil; [but] Saudi Arabia said that's up to OPEC+," OANDA's senior market analyst Jeffrey Halley said in a July 18 note.

"Oil prices are sharply unchanged today in Asia, which tells you who the market believes [in]," he added.

Biden told media reporters that Saudi Arabia's Crown Prince Mohammed bin Salman has agreed to boost the amount of oil it pumps, easing high gas prices for Americans.

However, Saudi officials said on July 16 that the country's oil production policies are implemented within the OPEC+ group.

"We listen to all statements from our friends and partners around the world, in particular consumers ... but at the end of the day, OPEC+ has an existing system to monitor the markets and guarantee supply according to needs of the energy market," Saudi foreign minister Faisal bin Farhan said at a press conference after the end of the summit.

The current OPEC+ agreement holds the group's August quotas in place through the end of the year. Saudi Arabia will be obliged to hold its output at 11 million b/d, about 1 million b/d slightly less than its stated production capacity, while the UAE's quota will be 3.17 million b/d, about 830,000 b/d below its claimed capacity.

Meanwhile, the annual maintenance of the Nord Stream pipeline is set to finish on 21 July after Russia cited maintenance issues with turbines at the Portovaya compressor station.

However, market analysts remain doubtful whether the flows will be restored to full capacity upon the completion of maintenance.

In mid-June, Russian state-controlled Gazprom had cut flows to Germany via the Nord Stream pipeline to just 40% of capacity.

"A prolonged period of reduced flows along the pipeline would mean that Europe will potentially have to tap into inventories over the summer, which would leave the region much more vulnerable as we head into the next heating season," ING Head of Commodities Strategy Warren Patterson said in a July 18 note.