Oil rises 2% as no immediate increase in Saudi production expected
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NEW YORK – Oil gained 2.5% on Friday after a U.S. official told Reuters that an immediate increase in Saudi oil production was not expected, and as investors wondered whether OPEC has the potential to significantly increase crude production.
The comment during US President Joe Biden’s visit to the Middle East comes at a time when the spare capacity of members of the Organization of the Petroleum Exporting Countries (OPEC) is running out.
“Part of the support is that everyone and their brother who digs into the Saudi situation sees that they don’t have a lot of capacity left,” said John Kilduff, partner at Again Capital LLC in New York.
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Brent crude futures settled at $101.16 a barrel, up $2.06, or 2.1%, while West Texas Intermediate crude settled at $97.59 a barrel. barrel, gaining $1.81, or 1.9%.
Brent crude futures for September delivery rose $2.06 to settle at $101.16 a barrel, a gain of 2.08%.
Both benchmarks saw their biggest weekly percentage declines in about a month, largely on fears earlier in the week that a looming recession could stifle demand. Brent lost 5.5% in its third weekly decline, while WTI fell 6.9% in its second weekly decline.
Biden, driven by energy and security interests, arrived in Jeddah on Friday and was expected to call on Saudi Arabia to pump more oil.
But the United States does not expect Saudi Arabia to immediately increase oil production and is monitoring the results of the next OPEC+ meeting on Aug. 3, a U.S. official told Reuters.
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“If the market was expecting an announcement between President Biden and (Saudi Crown Prince) Mohammed Bin Salman that oil production was going to be increased, they were deeply disappointed,” said Andrew Lipow of Lipow Oil Associates in Houston. .
“But I think in the coming weeks, especially at an upcoming OPEC meeting, we could see an increase in production in both Saudi Arabia and the United Arab Emirates.”
The United States could still secure a commitment that OPEC will increase production in the coming months in the hope that it will send a signal to the market that supplies are coming if needed.
Meanwhile, the U.S. oil rig count, an early indicator of future production, rose by two to 599 this week to its highest level since March 2020, energy services firm Baker Hughes Co said.
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Also signaling an increase in oil supply on the horizon, Libya’s oil chief said crude production would resume after encountering groups who have blocked oil facilities in the country for months.
The lifting of force majeure on production could mean a return of 850,000 barrels per day.
On the economic front, the most hawkish policymakers at the U.S. Federal Reserve said on Thursday they favored a 75 basis point rate hike at its policy meeting this month, not the biggest. increase traders had expected after a Wednesday report showed inflation was accelerating.
Concerns that the Fed could opt for a full 100 basis point rate hike this month and weak economic data had led Brent and WTI to lose more than $5 on Thursday below the 23rd closing price. February, the eve of Russia’s invasion of Ukraine, although both contracts had recovered almost all of the losses by the end of the session.
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Analysts, however, expect continued pressure on oil due to concerns over the global economy.
“Brent has fallen sharply below $100 a barrel this week. It is likely to continue to decline as recession fears are unlikely to subside for the time being,” Commerzbank said in a note.
Bearish market sentiment also followed further outbreaks of COVID-19 in China, which hampered a recovery in demand.
China’s refinery throughput in June was down nearly 10% from a year earlier, with production for the first half down 6% in the first annual decline for the period since at least 2011, according to data. data released Friday. (Additional reporting by Rowena Edwards in London, Jeslyn Lerh in Singapore Editing by Marguerita Choy, Susan Fenton and Chizu Nomiyama)