WTI down early on Opec+ deal, variant fears

WTI crude futures slumped today after Opec+ reached an agreement on boosting crude supply, while growing concerns over the Delta variant of Covid-19 sparked a broader market selloff.

August Nymex light sweet crude futures lost $4.82/bl to $66.99/bl as of 12:24pm ET. September Ice Brent slid $4.41/bl to $69.18/bl.

Yesterday, Opec+ resolved a dispute between Saudi Arabia and the United Arab Emirates and agreed on a deal to boost its collective crude output quota from August by up to 400,000 b/d each month until the remaining 5.8mn b/d of its original 9.7mn b/d production cut is fully unwound. The group also agreed to higher baselines from May next year, not just for the UAE but also for four other members.

The planned 400,000 b/d a month increase in supply will keep the market in deficit in the coming months, Goldman Sachs said. The bank views the deal as supportive to its "constructive oil price view", although it concedes that prices may "continue to gyrate in the coming weeks" given growing concerns over the Delta variant.

Oil also tumbled alongside equities as fears mounted that the spreading variant could halt the economic recovery in its tracks and dampen the outlook for crude demand. In addition, a stronger dollar reduced the attraction of commodities priced in the greenback.

Elsewhere, Iran should begin crude exports this week from the port of Jask, outside the strait of Hormuz. An official with state-owned NIOC told oil ministry news agency Shana that the first injection of crude into the 1,000km Goreh-Jask pipeline is almost at the port. NIOC has said that it expected the first exports to occur in June.

By Stephen Cunningham