Oil Trades Near $66 as OPEC Split Deepens Over Production Boost

Oil traded near $66 a barrel as producing countries disagreed over relaxing output curbs and OPEC highlighted the uncertainty over the strength of demand later this year.

Futures in New York fell 0.2 percent after a 0.6 percent increase Monday. Saudi Arabia and Russia are trying to garner support for lifting production limits, while Iraq joined Venezuela and Iran in coming out against the proposal. In its monthly market report, OPEC emphasized the deep uncertainty over the strength of demand for its oil, a move that could give ammunition to opponents of an output increase just a week before contentious talks in Vienna.

Oil has slumped since late May after Saudi Arabia and Russia signaled they’re ready to loosen output curbs to make up for potential supply disruptions from other producers. Both nations, which have already started to boost production, may propose a gradual increase when the Organization of Petroleum Exporting Countries and its allies meet June 22-23 in Vienna.

“The stage is set for a heated conference,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.

West Texas Intermediate crude for July delivery traded at $65.96 a barrel on the New York Mercantile Exchange, down 14 cents, at 7:55 a.m. Total volume traded was about 16 percent below the 100-day average.

Brent futures for August settlement fell 36 cents to $76.10 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $10.19 premium to WTI for the same month.

Futures on the Shanghai International Energy Exchange advanced 1 percent to 472.1 yuan a barrel, after falling 0.2 percent on Monday.

Deep Divisions

The split among OPEC members appears to be deepening ahead of the key meeting in Vienna later this month. Iraq “rejects unilateral decisions made by some producers which do not consult with the rest,” Oil Minister Jabbar al-Luaibi said in a statement. That came after Iran and Venezuela — both subject to U.S. sanctions — wrote to OPEC members urging them to unite against pressure from America to ease the curbs.

Still, Saudi Arabia and Russia are already showing signs of weakening commitment to production cuts under the agreement that took effect in January 2017. Saudi Arabia boosted oil output to 10.03 million barrels a day in May, the highest since October. Russia raised production to the highest in 14 months in the first week of June as some oil companies breached their caps, according to a person with knowledge of the matter.

There’s a “wide forecast range” for how much crude OPEC needs to pump in the second half of the year, its research department said in a monthly report on Tuesday. With a range of uncertainty of 1.7 million barrels a day, demand could either be significantly higher, or slightly lower, than OPEC’s current output.

Other oil-market news:

OPEC will revive about 500,000 barrels a day of halted output, with a boost by the group’s four main producers looking “ inevitable,” Citigroup said in a note. New leaks were discovered in a Nigerian pipeline that was halted on June 8, with no timing given for a restart. The U.S. and North Korea agreed to seek complete denuclearization of the Korean peninsula following a historic summit between President Donald Trump and Kim Jong Un, yet the accord set no deadline and left the path to disarmament undefined.