OPEC+ on Thursday decided to increase production by 648,000 barrels per day
The Organization of the Petroleum Exporting Countries and its allies decided on Thursday to increase production by 648,000 barrels per day (bpd) in July and August, instead of the 432,000 barrels previously agreed. The decision did not meet expectations for Europe.
Traders consider the increase to be too low compared to the expected increase in demand from China and the risks of the EU embargo.
Oil prices moved in a narrow range on Friday as OPEC+'s decision to increase production was questioned, whether increased production could offset the loss of supply from Russia and whether China could meet rising demand as COVID restrictions eased.
Brent crude futures were down 15 cents to $117.46 a barrel at 0408 GMT. West Texas Intermediate (WTI) crude futures fell 29 cents to $116.58 a barrel.
While Brent is on track to slide this week, WTI is on track for its sixth weekly gain as US supplies are so tight, fueling export restrictions or an unexpected profit tax for oil and gas producers.
OPEC+ production increases were split proportionally between member states, but as Russia is involved in the deal and members like Angola and Nigeria have already hit their targets, analysts said the supply increase will likely be less than the announced volume, or Russia will be indirectly involved.
Russia's stay in the group indicates that production from the alliance will continue to struggle to meet even this modest increase in quota increases.
Russia's production has fallen by 1 million barrels a day since its invasion of Ukraine and is likely to fall further as the European Union's ban on Russian oil comes into play.
With daily COVID-19 cases falling, China's financial hub Shanghai and its capital, Beijing, loosened their COVID-19 restrictions this week. The central Chinese government has pledged broad support to stimulate the country's economy, which is expected to target high fuel-intensity sectors such as infrastructure and real estate construction.
China's reopening from Covid quarantines is positive for the demand for now, but the country maintains its Zero Covid policy, so sudden lockdowns could quickly erode that effect.
Analysts warn of downside risks to oil demand and prices as Beijing will not change its stance on COVID-19 rules.
Thursday's government data showed US crude inventories fell much more than expected in the week to May 27, with gasoline inventories falling against expectations for an increase.
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