By Adedapo Adesanya
The prices of oil closed bullish on Friday on the back of expectations that global supply would become tighter despite the decision of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to increase output next month.
It was observed that Brent rose by $1.80 or 1.5 per barrel to $119.41 a barrel while the US West Texas Intermediate (WTI) also advanced by $1.80 or 1.5 per cent to $118.67 per barrel after the bloc on Thursday agreed to boost output by 648,000 barrels per day in July and August rather than 432,000 barrels per day it previously agreed.
The market normally would have reacted negatively to this development it instead stayed up because the group has not been meeting its previous quotas due to a lack of capacity, a situation that still persists.
OPEC+ divided its output increase across its members and still included Russia, whose output is falling due to sanctions and some buyers avoiding its oil over the invasion of Ukraine, suggesting the boost will undershoot the level that the market needs.
Market analysts noted that OPEC+ is still likely to supply considerably less oil to the market than agreed and thus not bring the relief that had been hoped.
Supplies are expected to remain tight as the US weekly inventory report from the Energy Information Administration (EIA) showed crude stockpiles fell by a more-than-expected 5.1 million barrels.
Another factor that helped the commodity yesterday was the rising demand from China after the country moderated COVID-19 restrictions.
China’s financial hub Shanghai and the capital, Beijing, have relaxed COVID-19 restrictions and the Chinese government has vowed to stimulate the economy.
Oil also held gains after US data showed employment increased more than expected in May, signs of a tight labour market.
American President, Mr Joe Biden, also announced the possibility of travelling to Saudi Arabia soon, a trip multiple sources said was expected and could include talks with Saudi Crown Prince Mohammed bin Salman.
The visit would be aimed at bolstering US-Saudi relations as Mr Biden seeks ways to lower US fuel prices.
Also, US energy firms this week left oil and natural gas rigs unchanged at 727 in the week to June 3, Baker Hughes Co BKR.N said in its report on Friday.