Oil leaps more than 3% after OPEC+ keeps output increase unchanged
LONDON: Oil prices jumped by about 3% on Monday after producer group OPEC+ kept output increases in July at the same level as the previous two months.
Brent crude futures climbed by $2.28, or 3.63%, to $65.06 a barrel by 1118 GMT. U.S. West Texas Intermediate crude was up $2.45, or 4.03%, at $63.24.
Both contracts lost more than 1% last week.
The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, decided on Saturday to raise output by 411,000 barrels per day (bpd) in July, the third consecutive monthly increase of that amount, as it looks to wrestle back market share and punish members that have produced more than their quotas.
Sources familiar with OPEC+ talks said on Friday that the group could discuss an even larger increase.
Oil traders said the 411,000 bpd increase had already been priced in to Brent and WTI futures.
'Had they gone through with a surprise larger amount, then Monday's price open would have been pretty ugly indeed,' Onyx Capital Group analyst Harry Tchilinguirian wrote on LinkedIn.
Kazakhstan has informed OPEC that it does not intend to reduce oil production, Russia's Interfax news agency reported on Thursday, citing Kazakhstan's deputy energy minister.
'Given the circumstances of a loss in market share and the almost too honest admission from Kazakhstan that it would not cut output, there does seem little choice,' PVM analyst John Evans said of the OPEC+ decision.
Oil prices would need to fall to $58 a barrel or lower to make it unprofitable for Kazakhstan to overproduce its quota, said Bjarne Schieldrop, SEB's chief commodities analyst.
Goldman Sachs analysts expect OPEC+ to implement a final 410,000 bpd production increase in August.
'Relatively tight spot oil fundamentals, beats in hard global activity data and seasonal summer support to oil demand suggest that the expected demand slowdown is unlikely to be sharp enough to stop raising production when deciding on August production levels on July 6,' the bank said in a note.
Morgan Stanley analysts also said they expect 411,000 bpd to be added back each month up to a total of 2.2 million bpd by October.
'With this latest announcement, there is little sign that the pace of quota increases is slowing,' the bank's analysts said.
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