NEW YORK (Reuters) – Oil prices rose Friday after oil producers agreed to a modest increase in crude oil production to offset lost production in a time of rising global demand.
The Organization of Petroleum Exporting Countries and other top crude oil producers meet in Vienna, agreed increase July production by about 1
The real increase, however, will be around 770,000 bpd, according to Iraq, as several countries that have recently suffered declines in production will barely reach full quotas, while other producers may not be able to fill the gap.
Actual production gains were bullish as they were below the highest levels discussed before the meeting.
"There was a lot of anticipation in the market that a lot of new oil would hit the market and that is not going to happen, at least not now," said John Kilduff, Partner at Wieder Kapital.
"We were teased with a rise of about 1.8 million barrels (per day) at one point, and in the end we came to 600,000," Kilduff said.
Brent crude gained $ 2.50 or 3.4 percent to $ 75.55 a barrel.
U.S. Crude oil rose $ 3.04, or 4.6 percent, to $ 68.58 a barrel, adding an extra boost following a surprise big drawdown on the Cushing, Oklahoma, storage hub.
Brent crude rose 2.7 percent a week, while US crude rose 5.5 percent.
In post-settlement trading, both US crude oil and Brent crude oil strengthened. Brent was up $ 2.56 or 3.5% to $ 75.61, and US crude was trading $ 3.70 or 5.65% to $ 69.23 a barrel at 4:07 pm. EDT [1807 GMT].
U.S. Crude's rebate on Brent declined by around 15 percent to $ 6.36 during the session, the lowest since May 11.
About three weeks before the OPEC meeting, prices had reached 3-1 / 2-year highs due to fears that larger increases in production could lead to oversupply.
Eventually, Saudi Arabia persuaded Iran to cooperate with the plan to reduce production after major consumers cut fuel costs.
OPEC's decision has puzzled some in the market, as producers have specified obscure targets for the increase, making it difficult to understand exactly how much more it will pump. The expectation that the increase will fall below the value of 1 million bpd has given the market a boost.
"The actual increase in production can easily be absorbed by the market," said Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, to the Reuters Global Oil Forum.
"They think that 1 million bpd is back online … it will not happen right away, it will take time," said Brian LeRose, senior technical analyst at ICAP.
International Brent branded over $ 100 a barrel over several years through 2014, dropped to nearly $ 26 in 2016 and then rebounded to over $ 80 in the last month.
The recent rally followed a decision by OPEC to bid to reduce global stocks.
The Group has begun to withhold supply in 2017, and this year the market has sharply increased in response to strong demand, triggering consumer demands for higher supply.
Falling production in Venezuela and Libya, as well as the risk of lower production from Iran due to US sanctions, have raised market concerns of a supply shortage.
The crude oil futures of the US Crude Months during the first half of the month extended their rally during the trading session and traded up to $ 1.51 per barrel over the second-month contract. This was the largest premium since August 2014. The spread eased slightly, settling at around $ 1.00 a barrel.
A sharp decline in inventory levels at the Cushing, Oklahoma, warehouse center helped fuel the rally, dealers said.
Storage has dropped as Gulf Coast refineries have been picking up crude oil that was available at a discount, said Bob Yawger, director of Energy in Mizuho. The result is lower inventory levels at the hub for at least seven weeks, he said.
U.S. The drills reduced the number of holes drilled for oil by one to 862, the first cut in twelve weeks, according to a weekly report from GE's Baker Hughes division. The number of drill holes is a leading indicator of production
Hedge funds and other asset managers cut their US crude oil futures and options bullishness to their lowest level in almost eight months, when crude oil prices plunged 1.4 percent as US production skyrocketed.
Additional coverage by Henning Gloystein in Singapore and Christopher Johnson in London; Arrangement by Marguerita Choy and Phil Berlowitz