Oil gained almost $2 on Thursday due to the prospect of stronger demand, lower U.S stocks, and a Reuters report indicating that OPEC+ producers could increase production in the next months.
Brent crude oil gained $1.86 or 2.5% to $76.48 per barrel by 1212 GMT. U.S. West Texas Intermediate crude oil was up 2.37, or 3.2% at $75.84.
According to a source from OPEC+, OPEC+ will be adding approximately 2 million barrels per daily (bpd), of oil to the market during its meeting today. This is between August and December according to Reuters.
According to the source, the monthly output increase by the Organization of the Petroleum Exporting Countries and its allies Russia would be less than 0.5million bpd.
“The consensus was for 500,000 bpd, or slightly more. Giovanni Staunovo, UBS analyst, stated that 400,000 bpd would be less than expected for August. This would maintain tight market conditions this summer with rising demand in the coming weeks.
Louise Dickson, a Rystad Energy analyst, said that the market could absorb the proposed output increase.
She stated that prices would be supported if OPEC+ maintains a prudent stance and raises its production in a cautious way – which is up to 500,000 bpd.
WTI increased more than 10% in June, while Brent added over 8%, reaching their highest level since October 2018.
Analysts predict that oil demand will increase in the second half, as more people get vaccinated against COVID-19, and travel restrictions are relaxed.
“In the first six months of the year, there has been a lot of improvement in the economy and oil demand growth,” stated Tamas Varga from London’s PVM Oil, an oil analyst.
Concerns are growing that the recovery of demand could be hampered by outbreaks of the Delta coronavirus. In June, Asia’s factory activity slowed down due to renewed lockdowns and rising prices.
According to data from Energy Information Administration, crude stockpiles in the United States fell for the sixth consecutive week last week as a result of rising demand.
The U.S. was also supported by a drop in crude inventories at Cushing (Oklahoma), the delivery point for WTI. This is the lowest level since March 2020.