Asia crude futures: Ice Brent falls sharply

Ice Brent crude futures fell in early Asian trading today as Opec+ coalition agreed a deal to boost its collective output by up to 400,000 b/d each month through to the end of next year.

At 10.06am Singapore time (02:06 GMT) the Ice front-month September Brent contract was at $72.50/bl, down by $1.09/bl from its settlement on 16 July when the contract ended 12¢/bl higher.

The Nymex front-month August crude contract was at $70.80/bl, down by $1.01/bl from its 16 July close when the contract settled higher by 16¢/bl.

The Opec+ agreement was brokered in a virtual ministerial meeting yesterday, ending a two-week output policy deadlock centred on a demand by the UAE for its baseline to be revised. The UAE, now Opec's third-largest producer behind Saudi Arabia and Iraq, complained at the previous Opec+ meeting in early July that its original baseline was "outdated" and said it would object to an extension beyond April 2022 unless Opec+ agreed to revisit its baseline, and in turn, how its production quota is calculated.

As a compromise, the group agreed to adjustments in baselines from 1 May 2022, not just for the UAE but also for four other members: Saudi Arabia, Russia, Iraq and Kuwait. The changes will lift the combined baseline levels of production of the five countries by a combined 1.633mn b/d from May next year, with Russia and Saudi Arabia accounting for almost two-thirds of the increase.

The US drilling rig count climbed by five last week to 484, according to data from US oil services firm Baker Hughes data. The number of oil rigs increased from last week by two to 380.

The US continues to see signs of demand recovery, with initial jobless claims at the lowest since March 2020 when the Covid-19 pandemic prompted lockdowns.

By Azlin Ahmad