Us crude hovered around 75.04 during the Asian session on Friday (July 2). Oil prices rose about 2 per cent on Thursday, with Brent and US crude reaching their highest levels since October 2018. Amid signs that the OPEC+, made up of the Organization of Petroleum Exporting countries (OPEC) and its allies, may increase production at a slower-than-expected pace in the coming months, rising global fuel demand will lead to tight supplies.

The OPEC+ talks ended on Thursday with no final agreement on production policy and an earlier agreement in principle to increase production by 400000 b / d a month from August to December, but the UAE raised objections at the last minute and ministers will meet again on Friday. To hold more talks on oil production policy, it is not clear whether the organization's previous proposals can still reach a consensus. The dramatic turn of events left the market at a loss at a time when oil prices were above $75 a barrel. It has also damaged the organisation's carefully rebuilt reputation, raising fears of a previously destructive Saudi-Russian price war.

In response to the damage to oil demand caused by COVID-19 's crisis, OPEC+ last year agreed to cut production by nearly 10 million barrels a day from May 2020 and plans to phase out production restrictions by the end of April 2022. At present, the reduction in production is about 5.8 million barrels per day. The United Arab Emirates opposed the proposal at the meeting and set ambitious targets for oil production. The representative of OPEC+ said that the UAE asked OPEC+ to change the production reduction benchmark, that is, to calculate the initial production level of the production reduction, and that the new baseline would allow the UAE to increase production by an additional 700000 b / d to about 3.8 million b / d.

Javier Blas, chief energy correspondent for Bloomberg, said the UAE's proposal would allow the country to increase production significantly, while it would also allow Saudi Arabia to increase production, but Saudi Arabia opposed it. The biggest losers will be Russia and Iraq, which will be forced to cut production to hedge higher production in the United Arab Emirates. Peter McNally, global head of industry, raw materials and energy at Third Bridge, says it will always take time for energy ministers from dozens of countries to agree on a single number. "OPEC looks like it will exercise restraint on production," said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. "for me, the market is in a good position."

However, Bob Yawger, head of energy futures at Mizuho Securities, pointed out that the OPEC demand forecast did not take into account factors such as the possible increase in supply in Iran, the spread of novel coronavirus Delta variants and the seasonal low demand for gasoline in the United States. At present, there has been an outbreak of Delta variant virus infection in many countries, and people are worried that the recovery will slow down.

During the day, we will focus on US non-farm payrolls data for June, US trade account for May, the final monthly rate of US durable goods orders in May, US President Joe Biden's speech on June employment report, and OPEC+ parties did not reach a final agreement on production policy on Thursday, and will meet again on Friday.

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