Oil prices rallied Friday, with US crude futures up nearly 6% for the week, as OPEC members agreed to raise output but by an amount that appears to be less than the market had anticipated.
West Texas Intermediate, the US benchmark, rose $US3.04, or 4.6%, to settle at $68.58 a barrel, while Brent, the global standard settled up $US2.50, or 3.4%, to $US75.55 a barrel.
The rise was the largest daily percentage increase since April.
Oil shares in Europe and the US rose and local oil stocks such as Santos and Woodside will be higher here later today.
Friday’s rise pushed Brent to a weekly gain of 2.9% after back-to-back losing weeks. WTI surged 5.6%, the first week in five that it has ended in the black and its best five-day run since April.
News reports said OPEC oil ministers meeting in Vienna had agreed to a nominal increase in production of 1 million barrels a day, but an actual figure was omitted from the group’s final statement.
Analysts said an agreement to reduce over compliance with the existing 1.8 million barrels a day production cap would mean the increase by OPEC members would be less than that, analysts said.
Under the deal set in November 2016 and implemented in January 2017, 12 of the OPEC members agreed to cut their production by 1.2 million barrels of oil a day from late 2016 levels.
They have cut even more than the requirement. With OPEC pegging compliance at 152% in May analysts reckon that is an extra output reduction of about 624,000 barrels a day, which they plan to add back into the market.
Russia at the weekend threw its support behind the Saudi plan.
Russian Energy Minister Alexander Novak said his country backed a plan by the OPEC to raise crude production by a nominal one million barrels a day starting next month.
Though, the actual increase is expected to be around 600,000 barrels a day, according to people familiar with the matter, due to some producers being unable to increase output. That’s far lower than the 1.5 million barrel a day increase Russia had been targeting ahead the OPEC meeting.
Saudi Arabia’s oil minister, Khalid al-Falih said Saturday the release of additional barrels on the market would be gradual, but that his country would begin to sell more oil at the start of July.
US daily production ran at 10.9 million barrels for a second week last week and could ver well breach 11 million in the next two months.
Meanwhile the weekly oil and gas drilling rig report from Baker Hughes should a fall of one in the number of active oil rigs in use to 862. That fall ended four straight weeks of increases. The total US rig count dropped by 7 to 1,052.
