Crude Oil Prices Rise Modestly as OPEC+ Plan Disappoints

Crude oil prices rose somewhat on Friday, as markets dismissed OPEC+‘s intention to raise output, questioning if the additional output would compensate for lost Russian supply and fulfil China’s surging demand in the face of loosening COVID restrictions.

At 0640 GMT, WTI crude prices in the United States were up 7 cents to $116.94 a barrel, while Brent crude futures were up 18 cents to $117.79 a barrel.

The Organization of Petroleum Exporting Countries and its partners, known as OPEC+, voted on Thursday to increase output by 648,000 barrels per day (bpd) in July and August, rather than the 432,000 bpd initially agreed upon, which was deemed insufficient for a tight market.

The Organization of the Petroleum Exporting Countries and its partners, collectively known as OPEC+, decided on Thursday to increase output by 648,000 barrels per day (bpd) in July and August, rather than the 432,000 bpd originally agreed, which was considered as insufficient for a tight market.

The increases were distributed proportionally among the member countries, but analysts say that with Russia involved in the accord and members like Angola and Nigeria already failing to fulfil their commitments, the pact’s chances of success are slim.

“The alliance’s production will continue to struggle to satisfy even this modest increase of quota rises,” ANZ Research analysts wrote in a note.

According to ANZ analysts, Russian output has already plummeted by 1 million bpd since its invasion of Ukraine, which Moscow describes as a “special military operation,” and is expected to decline considerably more once the European Union’s ban on Russian oil takes effect.

“To put it another way,” said SPI Asset Management Managing Partner Stephen Innes, “traders believe the incremental increase is too tiny relative to the mounting downside supply risks from the EU embargo amid predicted increased demand from China.”

COVID-19 restrictions were eased this week in China’s financial hub Shanghai and capital, Beijing, as daily COVID-19 instances fell. The Chinese central government has pledged wide assistance for the country’s economy, which is likely to focus on high-fuel-intensity sectors like infrastructure and property development.

Analysts noted, however, that because Beijing has not modified its stance on COVID-19 guidelines, there are downside risks to oil consumption and prices.

“For the time being, China’s reopening from COVID lockdowns is beneficial for demand,” National Australia Bank analysts wrote in a note. “However, the government remains a zero-COVID policy, so flash lockdowns can swiftly erode this impact.”

Although Brent was set to decrease for the week, WTI was set to increase for the sixth week in a row as supply in the United States remains tight, prompting discussion of fuel export restrictions or a windfall profits tax on oil and gas companies. find out more

According to government statistics released on Thursday, oil stocks in the United States declined far more than expected in the week ending May 27, while gasoline inventories also fell, contradicting predictions for a gain.