Oil prices saw a rebound of more than $1 a barrel on Monday after the producer group OPEC+ opted to raise output in July by the same margin as in each of the preceding two months, providing relief to market participants who had anticipated a more substantial increase.
Brent crude futures jumped by $1.34, or 2.13 percent, hitting $64.12 a barrel by 03:46 GMT (currently trading above $64.20), following a 0.9 percent decline on Friday. Meanwhile, U.S. West Texas Intermediate crude rose to $62.31 a barrel, gaining $1.52, or 2.5 percent, after a 0.3 percent drop in the previous session (currently above $62.50).
Both contracts had fallen by more than 1 percent during the previous week.
OPEC+ output increase decision
The Organization of the Petroleum Exporting Countries and its allies made the decision on Saturday to elevate output by 411,000 barrels per day in July, marking the third consecutive month in which the group known as OPEC+ has increased production by the same amount, as it aims to regain market share and penalize over-producers.
The group was widely expected to deliberate on a larger production increase.
“Had they gone through with a surprise larger amount, then Monday’s price open would have been pretty ugly indeed,” reported Reuters, citing analyst Harry Tchilinguirian of Onyx Capital Group, who commented on LinkedIn.
Oil traders indicated that the 411,000-bpd output increase had already been factored into Brent and WTI futures.
“The headline motive has centred on punishing OPEC+ members like Iraq and Kazakhstan that have persistently produced above their pledged quotas,” noted the Commonwealth Bank of Australia in a Monday report.
Kazakhstan has communicated to OPEC that it does not plan to reduce its oil production, according to a Thursday report by Russia’s Interfax news agency, which cited Kazakhstan’s deputy energy minister.
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Monitoring U.S. crude production
Looking forward, analysts at Goldman Sachs predict that OPEC+ will enact a final production increase of 0.41 million bpd in August.
Meanwhile, low levels of U.S. fuel inventories have heightened supply concerns in light of expectations for an above-average hurricane season, analysts reported.
Traders are also closely monitoring the effects of declining prices on U.S. crude production, which reached an all-time high of 13.49 million bpd in March.
Last week, the number of operational oil rigs in the U.S. decreased for the fifth consecutive week, falling by four to 461, the lowest level since November 2021, according to Baker Hughes’ weekly report released on Friday.
