By Adedapo Adesanya
Oil prices were flying high on Thursday due to signs of tight supply as the Organisation of the Petroleum Exporting Countries and allies (OPEC+) is expected to approve its moderate monthly increases in crude production when it decides output levels for July.
During the session, the price of the Brent crude jumped by $3.13 or 2.74 per cent to trade at $117.20 per barrel, while the United States West Texas Intermediate (WTI) crude appreciated by $3.51 or 3.18 per cent to $113.80 per barrel.
OPEC+, led by Saudi Arabia and Russia, will meet on June 2 and will likely not change course since it decided to gradually return supply to the market until it unwinds all the 10 million barrels per day cuts announced in April 2020 at the peak COVID lockdowns globally.
The alliance has been sticking to modest production rises even after oil prices spiked to more than $100 per barrel after a key member of the pact, Russia, invaded its Ukrainian neighbour.
In early May, OPEC+ agreed to leave its production plan unchanged, aiming to boost crude oil production in June by 432,000 barrels per day, in a move widely expected by the market.
This will be the fourth OPEC+ meeting since the Russian invasion of Ukraine, to which it has steered clear and the alliance has resisted calls from major oil importers to do more to lower the high oil prices.
While OPEC+ is sticking to its policy of modest monthly increases, the start of the summer driving season in the US is expected to spur demand – a positive move for the market.
The US peak driving season begins with the Memorial Day weekend and the country will celebrate Memorial Day on Monday.
Prices also drew support from a big weekly drawdown of about one million barrels in US crude inventories, reported on Wednesday.
The market is also expecting more from the much-debated ban on Russian oil with European Council President Charles Michel expressing confidence that an agreement can be reached before the council’s next meeting on May 30.
However, Hungary – a major Russian ally – remains the problem, as EU sanctions require unanimous support among the 27 members.
Hungary is pressing for about €750 million to upgrade its refineries and expand a pipeline from Croatia.
Also, Hungarian Prime Minister Viktor Orban said in a letter to the President of the European Council, asking that the oil embargo be removed from the topics of discussion at the summit.
Another factor also supporting oil prices is Shanghai preparing to reopen after a two-month lockdown.
Dipo Olowookere