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World | Jul 29, 2022

Oil prices rise as chances of OPEC+ supply boost dim

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Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. (Photo: REUTERS/Agustin Marcarian/File)

LONDON (Reuters)

Oil prices rose in European trading on Friday (July 29) as attention turned to next week’s OPEC+ meeting and expectations that it will dash US hopes for a supply boost.

Brent crude futures for September settlement, due to expire on Friday, gained $2.30 to trade at US$109.44 a barrel by 1200 GMT after touching their highest since July 5. The more active October contract was up $2.24 at $104.07.

US West Texas Intermediate (WTI) crude futures rose $2.20 to US$98.62 a barrel.

Both contracts are set for a second monthly loss, however, down 4.7 per cent and 6.8 per cent respectively.

A weaker dollar and stronger equities also lent support on Friday. A fall in the dollar makes oil cheaper for buyers with other currencies.

Global equities, which often move in tandem with oil prices, were up on the hope that US monetary tightening would not be as hawkish as initially expected after disappointing growth figures.

A Reuters survey forecast Brent and US crude would average $105.75 and $101.28 a barrel respectively this year.

Front-month Brent futures are selling at a rising premium to later-loading months in a market structure known as backwardation, indicating tight current supply.

“The oil market in Europe is considerably tighter than in the United States, which is also reflected in the sharply falling Brent forward curve,” said Commerzbank analyst Carsten Fritsch.

A key driver will be the next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+, on Aug. 3.

OPEC+ sources said the group will consider keeping oil output unchanged for September, with two OPEC+ sources saying a modest increase would be discussed.

A decision not to raise output would disappoint the United States after President Joe Biden visited Saudi Arabia this month hoping to strike a deal to open the taps.

Analysts, however, said it would be difficult for OPEC+ to boost supply, given that many producers are already struggling to meet production quotas.

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