By Adedapo Adesanya
Prices of crude oil closed higher on Friday as the market’s attention turned to next week’s meeting of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) and dimming expectations that the producer group will imminently boost supply.
The news that OPEC+’s meeting next week (August 3) would likely end with no significant production target increase bolstered prices to a significant degree, pushing the Brent higher by $2.87 or 2.68 per cent to $110.00 per barrel as the United States West Texas Intermediate (WTI) crude gained $2.20 or 2.28 per cent to sell at $98.62 per barrel.
On Thursday, OPEC+ sources suggested that OPEC+ was likely to keep its production targets for September steady with August levels while some other OPEC+ sources said that the group could discuss a small output hike.
The market is aware, however, that even a hike in production targets is unlikely to result in an actual OPEC+ production boost due to underproduction compared to the group’s current targets.
A decision not to raise output would disappoint the United States after US President, Mr Joe Biden, visited Saudi Arabia this month hoping to strike a deal to add production in other to ease soaring energy costs.
Analysts, however, said it would be difficult for OPEC+ to boost supply, given that many producers including Nigeria are already struggling to meet production quotas.
Another bullish factor for crude oil on Friday was the Energy Information Administration (EIA)’s publication of its numbers for US crude oil production for May, which showed that crude oil production in the world’s largest producer actually fell in May, contrary to the EIA’s latest estimates from its Short Term Energy Outlook.
US field production of crude oil fell in May to an average of 11.595 million barrels per day, down from 11.652 million barrels per day in April—a 57,000 barrels per day decline.
May’s production figures are just 239,000 barrels per day above where they were at the same time last year and 1.247 million barrels per day below pre-COVID levels.
A weaker US Dollar also lent support for the black gold on Friday. A fall in the Dollar makes oil cheaper for buyers with other currencies.
Dipo Olowookere