Oil rises as OPEC+ prepares to unwind cuts, Iran tensions persist

Analysts raise Ampol target, see Tenaga renewable growth

OPEC+ is expected to agree to raise output by an additional 188,000 barrels a day at its meeting Sunday, completing the unwinding of 1.65 million barrels a day in voluntary cuts made in 2023, according to market participants. While the increase may appear significant on paper, Baron Lamarre, co-founder of Index Litro and former head of trading at Petronas, said the physical market is characterized by a gap between quotas and actual barrels that reach the market.

“Right now we’re living in a physical market where quotas and actual barrels that make it to market are two very different things,” Lamarre said. Some members are already producing below quota, and the group retains the flexibility to pause, roll back, or deepen cuts, he added. “So this is more of a signal that they see the market as manageable for now—not some big, game-changing flood of supply.”

Oil futures turned higher in early U.S. trading Friday and were on track for hefty gains for July, which saw the U.S.-Iran Memorandum of Understanding fall apart and Iran resume attacks on shipping in the Strait of Hormuz. West Texas Intermediate crude rose 2.2% to $85.42 a barrel. September Brent gained 1.5% to $90.36 ahead of Friday’s expiry, while the October contract advanced 1.8% to $88.47.

Scott Shelton of TP ICAP said in a note that the market should go higher, led by diesel and gasoline, because refinery run rates are too low on a lack of crude. “The reality is that we are back to a very small amount of crude versus what is needed,” Shelton wrote.

Mizuho’s Robert Yawger described the conflict as having shifted from eliminating Iran’s nuclear program to opening the Strait of Hormuz, but noted there does not appear to be a plan to reopen the waterway. “Saudi exports through the Red Sea are now risky, and the concept of Iran abandoning their nuclear program and handing over their nuclear dust to the U.S. seems to be highly unlikely,” Yawger said in a note.

The U.S. hit back at Iran for an attack on its bases in Jordan, as expected, but continuing strife around the Persian Gulf limited losses, the WSJ reported earlier. Oil futures returned some of the previous session’s gains, with WTI settling down 1% at $83.59 a barrel and Brent falling 1.9% to $89.03 a barrel ahead of Friday’s expiration.

Austrian oil-and-gas company OMV reported a solid fiscal print that beat expectations, according to RBC Capital Markets analyst Adnan Dhanani. The strong contribution from Borouge International is encouraging, Dhanani said. He added that investors will want to know how OMV will continue to capture high refining margins as tensions in the Middle East continue. OMV shares fell 0.4% to 63.20 euros.

In Australia, Macquarie’s bull on Ampol reiterated an outperform rating on the stock, noting that local refiners experience multiple benefits from the U.S.-Iran conflict. A Macquarie analyst wrote that local refiners are key beneficiaries from the ensuing volatility, pointing to the impact on refining margins, trading opportunities, and government policy. The analyst said strong June-quarter operations at Ampol’s Lytton refinery are capturing the industry upcycle, and the company’s in-house trading platform is contributing materially to earnings. Macquarie raised its September-quarter refining margin forecast on the ongoing conflict and lifted its target price by 3% to 48.00 Australian dollars. Ampol shares were flat at A$39.49.

In Malaysia, Tenaga Nasional’s renewable subsidiary, Vantage RE, contributes only about 2% of the parent’s Ebitda but is expected to play a key role in increasing the utility’s renewable energy mix to 49% by 2030 from 23% currently, according to RHB IB analyst Max Koh. Koh expects Vantage RE’s portfolio to expand by 40% to 1.2GW by 2030 from its current 908MW, supported by a pipeline of wind and battery storage projects in the U.K. and Ireland. While most of Tenaga’s renewable capacity growth will come from domestic projects, its overseas assets should strengthen technical expertise and improve project economics, Koh said. RHB maintains its buy rating on Tenaga and keeps its target price at 16.50 ringgit. Shares were 0.3% lower at 14.58 ringgit.