Fri Jul 29 2022
Lucy Harlow (3983 articles)

Oil prices rise on tight supply as attention turns to OPEC+ meeting

Oil prices rise on tight supply as attention turns to OPEC+ meeting

Oil prices gained about $1 in early trade on Friday, lifted by supply concerns and a weaker U.S. dollar as attention turns to what OPEC and allies including Russia agree at a meeting next week marking the end of their 2020 output reduction pact.

U.S. West Texas Intermediate (WTI) crude futures for September delivery rose $1.09, or 1.1%, to $97.51 a barrel by 0041 GMT, reversing losses from the previous session when sentiment was hit by fears of a recession in the United States.

Brent crude futures for September settlement, due to expire on Friday, rose 86 cents, or 0.8%, to $108.00 a barrel. The more active October contract climbed 87 cents, or 0.9%, to $102.70.

Brent is on course to climb nearly 5% for the week in its second straight weekly gain, while WTI is on track for a nearly 3% rise for the week, recouping the previous week’s losses.

“Oil prices have little chance of (posting) deep losses on the back of a weak U.S. dollar and the ongoing supply crunch,” said CMC Markets analyst Tina Teng.

Oil typically rises when the dollar falls as a weaker dollar makes crude cheaper for buyers holding other currencies.

The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together called OPEC+, on Aug. 3 will be key as the producers have now unwound the record 9.7 million barrels per day (bpd) supply cut they agreed in April 2020, when the Covid-19 pandemic slammed demand.

OPEC+ sources said the group will consider keeping oil output unchanged for September, but two OPEC+ sources also told Reuters a modest increase would be discussed.

A decision not to raise output would disappoint the United States after U.S. President Joe Biden visited Saudi Arabia this month hoping to strike a deal on oil production.

A senior U.S. administration official said on Thursday the government was optimistic about the OPEC+ meeting, and said extra supply would help stabilize the market.

Analysts, however, said it would be difficult for OPEC+ to boost supply much given that many producers are struggling to meet their production quotas due to a lack of investment in oil fields.

“OPEC production is constrained, though supplies are stabilizing in Libya and Ecuador. Under-investment in many member countries will keep production constrained,” ANZ Research analysts said.

Lucy Harlow

Lucy Harlow

Lucy Harlow is a senior Correspondent who has been reporting about Commodities, Currencies, Bonds etc across the globe for last 10 years. She reports from New York and tracks daily movement of various indices across the Globe