Oil futures jumped Thursday, with the U.S. benchmark topping $75 a barrel for the first time since October 2018, as traders await a decision by the Organization of the Petroleum Exporting Countries and its allies on further easing production curbs in response to growing demand as the global economy gathers momentum.
West Texas Intermediate crude for August delivery CL00, +2.33% CLQ21, +2.33% up $1.85, or 2.5%, at $75.32 a barrel on the New York Mercantile Exchange after ending the first half with a gain of more than 50%. September Brent crude BRN00, +1.76% BRNU21, +1.76%, the global benchmark, jumped $1.45, or 1.9%, to $76.07 a barrel on ICE Futures Europe.
“The OPEC+ group is widely expected to raise production by 500,000 to 1 million barrels per day. Given the strength of the oil demand outlook, an increase of supply around these levels could be comfortably absorbed by the market,” said Sophie Griffiths, analyst at Oanda, in a note.
OPEC+ sees oil demand growing by 5 million barrels a day in the second half of 2021, providing plenty of “wiggle room” to ease existing production curbs, she said.
A Reuters report said the group, made up of OPEC members and its allies, including Russia, were weighing a plan that would ease output curbs enough to add around 2 million barrels a day to the market between August and December. The report, citing an OPEC+ source, said the monthly increases would amount to less than 500,000 barrels a day.
The Reuters report said Russia and Saudi Arabia had reached a preliminary agreement on the deal, while a Bloomberg report said two delegates had described any understanding as merely a proposal.
Kazakhstan’s energy minister on Wednesday said supply hikes were being considered for either August or September, the Bloomberg report saId.
If an increase is pushed off to September, further gains would be likely, said Warren Patterson, head of commodities strategy at ING, in a note.
The final decision is expected to come at a meeting of OPEC+ ministers later Thursday, following a meetings of OPEC ministers and the Joint Ministerial Monitoring Committee.
August gasoline futures RB00, +1.01% RBQ21, +1.01% were up 2% at $2.2857 a gallon, while August heating oil HOQ21, +1.36% jumped 2.2% to $2.1746 a gallon.
August natural-gas futures NGQ21, +0.44% advanced 2.2% to $3.729 per million British thermal units, after closing Wednesday at the highest level for a front-month contract since December 2018.