Oil prices rose more than $2 a barrel on Friday as attention turned to next week’s OPEC+ meeting and expectations that the producer group will increase supply soon.
Brent crude futures contract for September, which expire on Friday, jumped more than $3 a barrel during the session and then pared gains to settle at $110.01 a barrel, up $2.87, or 2.7%. The more active October contract was up $2.14, or 2.1%, at $103.97.
West Texas Intermediate (WTI) crude futures rose $2.20, or 2.3%, to $98.62 after climbing above $5 a barrel.
Both contracts posted their second monthly losses, with Brent down about 4% for July and WTI about 7%.
Oil slid some gains after oil services firm Baker Hughes released data showing there was more supply, showing US drillers adding record oil rigs 23 months in a row. In July, the number of oil rigs rose 11, with a record increase for the 23rd month in a row, while the number of gas remained unchanged after rising for 10 months in a row.
Stocks rose, the dollar weakened. Stronger equity markets supported oil, as did the depreciating dollar, which made oil cheaper for buyers of other currencies.
There’s been a lot of macro impact on the oil market these days, with the stock market making a nice recovery and the drop in the dollar feeding the prices.
Global stocks, which often move with oil prices, rose on hopes that disappointing growth numbers will encourage the Federal Reserve to ease monetary tightening.
A survey estimates that Brent’s this year will average $101.28, and WTI averaging $105.75 a barrel.
Front-month Brent futures sell at an increasing premium against subsequent loading months, a market structure known as backwardation, which indicates restricted current supply.
The oil market in Europe is much tighter than in the US, which is reflected in the sharply falling Brent forward curve.
Investors will now watch the August 3 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies, collectively known as OPEC+.
OPEC+ sources said the group will consider keeping oil production unchanged for September. However, a modest increase would be discussed according to the two them’s belief.
President Joe Biden visited Saudi Arabia this month in hopes of an agreement to increase production, but the decision not to increase production may disappoint the United States.
Analysts said it would be difficult for OPEC+ to increase supply, given the inability to structure many producers to meet their production quotas.
Russia’s Interfax news agency reported that compliance with OPEC+’s oil production cut commitments reached 320% in June, citing a source familiar with the data. He said the group’s combined oil underproduction was 2.84 million barrels per day last month.
