(Bloomberg) --Oil prices climbed as the International Energy Agency warned of a deepening supply crunch.
Futures in New York increased by as much as 1.9% on Tuesday after earlier fluctuating between gains and losses. Crude supplies are set to “tighten significantly” amid a deadlock among members of the OPEC+ alliance, the IEA said in a report. The stalemate over whether to revive the Iranian nuclear deal also has reduced the threat of a flood of the nation’s crude onto global markets.
“The supply-deficit story is reasserting as the primary driver,” said Ed Moya, senior market analyst at Oanda Corp.
Oil prices have surged more than 50% this year as vaccination rollouts accelerated the reopening of economies, boosting fuel consumption. OPEC and allied crude producers have supported prices by taking a gradual approach to resurrecting shuttered supplies.
The oil consortium has been deadlocked on increasing production as the dispute between the United Arab Emirates and Saudi Arabia persists. Both countries have locked in stable crude output for next month.
“Even if OPEC decides to raise output in August, that crude will not reach refineries until after the August peak-demand period will be over,” Ed Morse, head of commodities research at Citigroup Inc., said in an email.
Nuclear talks between world powers and Iran are unlikely to resume until after the Islamic Republic installs its new president next month, all but eliminating the chances of an early revival of the accord that could trigger a jump in Iranian oil exports.
- West Texas Intermediate for August delivery gained $1.25 to $75.33 a barrel at 1:19 p.m. on the New York Mercantile Exchange.
- Brent for September settlement advanced $1.29 to $76.45 a barrel on the ICE Futures Europe exchange.
Still, the demand rebound is imperiled by the swift spread of the Covid-19 delta variant, which is forcing restrictions on work and mobility as it spreads through a largely unvaccinated Southeast Asia.
Indonesia, Southeast Asia’s biggest economy, is being wracked by a particularly brutal wave of the pandemic, prompting restrictions in the industrial heartland of Java and the tourist enclave of Bali. Malaysia is still in the midst of a nationwide lockdown, while Thailand has just stepped up limitations.
In the U.S., crude stockpiles dropped by 4 million barrels last week, according to a Bloomberg survey. The industry-funded American Petroleum Institute will report its supply tally later Tuesday, while government data will be released on Wednesday.
Other market news:
- American drillers have restored less than 20% of the oilfield services jobs lost due to the pandemic with companies favoring investor returns over boosting output, according to a trade group.
- Limetree Bay Refining LLC filed for Chapter 11 bankruptcy in Houston on Monday after the U.S. Environmental Protection Agency closed its Caribbean oil refinery.