The continuing lack of agreement among OPEC+ representatives on increasing the level of crude oil production means that this will not increase for the time being, which, given the growing summer demand, seems to push up the commodity price. Thus, the lack of agreement will be paid for by everyone at gas stations and in higher inflation.
WTI crude oil futures jumped 2 percent above $76.5 a barrel on Tuesday, settling near three-year highs, after reports that OPEC+ is once again delaying a ministerial meeting on oil production policy. Major oil producers failed to reach a deal last week after the United Arab Emirates blocked an agreement by Saudi Arabia and Russia to increase output by 2 million bpd in the second half of the year, saying the extension was contingent on a review of baseline production. The said OPEC+ meeting was expected to lead to a unanimous agreement to increase output this year and in 2022. Iraqi Oil Minister Ihsan Abdul Jabbar said on Monday that Baghdad is committed to the current agreement with OPEC+ and does not want oil prices to rise above current levels to achieve stability. The minister also said he hopes that a date for the next meeting could be set within 10 days. Meanwhile, in the U.S., energy companies increased the number of active oil and natural gas drilling rigs for the third week out of the last four. U.S. crude oil rose 1.5 percent last week, marking the sixth straight week of gains. Brent crude futures, meanwhile, hovered around $77.5 a barrel on Tuesday, near 32-month highs and extending gains for a fifth straight day.
Meanwhile, in the currency market, the U.S. dollar seems to start to weaken locally, which commodity currencies, including the Australian dollar in particular, could benefit from after the central bank meeting. The Australian dollar (AUD) rose nearly 1 percent against the US dollar after the Reserve Bank of Australia decided to phase out unprecedented emergency support at its last meeting. The central bank kept the cash rate at a record low of 0.1 percent at its July meeting, in line with widespread expectations. At the same time, the board decided to extend the current bond-buying program until at least mid-November, but will limit the amount of bond purchases to AUD 4 billion per week from the current AUD 5 billion. Thus, the RBA introduces the so-called tapering of the asset purchase program and begins to normalize the monetary policy.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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