London — Oil prices jumped by about 3 per cent on Monday after producer group OPEC+ kept output increases in July at the same level as the previous two months.
Brent crude futures climbed by $1.74, or 2.77 per cent, to $64.52 a barrel by 0827 GMT. U.S. West Texas Intermediate crude was up $1.94, or 3.19 per cent, at $62.73.
Both contracts lost more than 1 per cent last week.
The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, decided on Saturday to raise output by 411,000 barrels per day (bpd) in July, the third consecutive monthly increase of that amount, as it looks to wrestle back market share and punish members that have produced more than their quotas.
Sources familiar with OPEC+ talks said on Friday that the group could discuss an even larger increase.
Oil traders said the 411,000 bpd increase had already been priced in to Brent and WTI futures.
“Had they gone through with a surprise larger amount, then Monday’s price open would have been pretty ugly indeed,” Onyx Capital Group analyst Harry Tchilinguirian wrote on LinkedIn.
Kazakhstan has informed OPEC that it does not intend to reduce oil production, Russia’s Interfax news agency reported on Thursday, citing Kazakhstan’s deputy energy minister.
“Given the circumstances of a loss in market share and the almost too honest admission from Kazakhstan that it would not cut output, there does seem little choice,” PVM analyst John Evans said of the OPEC+ decision.
Goldman Sachs analysts expect OPEC+ to implement a final 410,000 bpd production increase in August.
“Relatively tight spot oil fundamentals, beats in hard global activity data and seasonal summer support to oil demand suggest that the expected demand slowdown is unlikely to be sharp enough to stop raising production when deciding on August production levels on July 6,” the bank said in a note.
Meanwhile, low U.S. fuel inventories have stoked supply jitters ahead of what is expected to be a more active than usual hurricane season, analysts said.
“More encouraging was a huge spike in gasoline implied demand going into what’s considered the start of the U.S. driving season,” ANZ analysts said in a note, adding that the gain of nearly 1 million bpd was the third-highest weekly increase in the past three years.
