OPEC+ slightly increases monthly oil production increase, supply still tight
Oil rose on Friday, bolstered by expectations that OPEC’s decision to raise production targets a little more than planned won’t add much to global supply, which must tighten as China eases COVID restrictions.
The Organization of the Petroleum Exporting Countries, known as OPEC+, and its allies have agreed to increase production by 648,000 barrels per day (bpd) in July and August, instead of 432,000 bpd as previously agreed.
Brent crude was up $2.11, or 1.8%, to settle at $119.72 a barrel as of 1338 GMT. West Texas Intermediate (WTI) crude rose $2, or 1.7%, to $118.87.
WTI crude posted a sixth-week gain amid shrinking supplies in the US, resulting in fuel export cuts or an unexpected tax on oil and gas producers.
Crude availability remains plentiful, with yesterday’s OPEC+ decision and continued acceleration in SPR emissions, especially as demand from refineries has dropped significantly from a few years ago.
Production growth may fall below the promised amount as OPEC+ also includes Russia, whose supply growth is shared among its members and sanctions have led some countries to avoid buying Russian oil since the invasion of Ukraine.
Biden will visit Saudi Arabia, despite he is offended by the murder of Washington Post journalist Jamal Khashoggi. The visit aims to strengthen US-Saudi relations as the US looks for ways to lower gasoline prices.
Supply is still tight. On Thursday, the US weekly inventory report showed crude inventories fell more than expected, 5.1 million barrels . Gasoline stocks also fell.
According to Baker Hughes in its report Friday, the number of oil and gas rigs by US energy firms is at 727 in the week through June 3.
Demand is increasing. China’s financial hub Shanghai and its capital Beijing have loosened COVID-19 restrictions, and the Chinese government has promised to boost the economy.
Oil held its gains after U.S. data showed employment rose more-than-expected in May, pointing to a tight labor market.
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