Oil prices rose on Thursday, supported by falling US oil stocks, as investors await the decision from major producers on whether to continue with supply cuts in the second half of the year.
Brent crude for September rose 15 cents, or 0.2%, to $74.77 per barrel as of 0629 GMT, while West Texas Intermediate (WTI) crude for August rose 22 cents, or 0.3%, to $73.69 per barrel.
WTI rose more than 10% in June, while Brent rose over 8% to its highest level since October 2018 as more people are vaccinated against COVID-19 and summer travel increases.
Analysts had forecast a larger global supply gap in the second half of the year, as the Organization of the Petroleum Exporting Countries and its allies continued production cuts as demand surged.
Last year, the group agreed to a record production cut of around 10 million barrels per day (bpd) starting in May 2020 and scheduled to be phased out by the end of April 2022.
It reduced supply cuts by 2.1 million barrels per day between May and July. It will now meet on Thursday to decide not to change production or possibly increase production by 0.5 – 1 million bpd or more modestly.
The group is also expected to discuss whether to extend the supply cut deal beyond next April.
In past discussions, Saudi Arabia appears to have taken a more cautious approach when Russia offered to increase supply.
To facilitate production cuts, global oil market fundamentals need to be sound. Encouraged by the recovery in demand, an increase in August is likely to support both producers and prices.
Brent is likely to reach $85, given higher OPEC+ production.
However, outbreaks of the Delta virus variant raise concerns that demand recovery may be interrupted. Renewed lockdowns and rising costs have already weakened the momentum in Asian factory activity in June.
U.S. crude inventories fell for the sixth week last week in response to increased demand, according to data from the Energy Information Administration. It further bolstered the US benchmark (WTI), pushing its cut on Brent Wednesday to its narrowest level since September 2020.
Looking at the year average, Brent averaged $67.48 per barrel this year, while WTI averaged $64.54.
