Oil Settles Higher Despite Opec+ Output Hike Plan: Al Attiyah Foundation

Doha: Oil settled higher on Friday, supported by expectations that Opec's decision to increase production targets by slightly more than planned will not add that much to global supply which should tighten as China eases COVID-19 restrictions.

The Organization of the Petroleum Exporting Countries and allies, known as Opec+, on Thursday agreed to boost output by 648,000 barrels per day (bpd) in July and August rather than 432,000 bpd as previously agreed. The output hike could undershoot the pledged amount since Opec+ divided the increase across its members and still included Russia, whose output is falling as sanctions have prompted some countries to avoid buying its oil since the invasion of Ukraine. Brent crude rose $2.11, to settle at $119.72 a barrel. US West Texas Intermediate crude advanced $2, to $118.87. Both benchmarks were up by $3 in after hours trading.

Meanwhile, a US weekly inventory report showed crude stockpiles fell by a more-than-expected 5.1 million barrels. Gasoline inventories also dropped. Demand is also rising as China's financial hub Shanghai and capital, Beijing, have relaxed COVID-19 restrictions and the Chinese government has vowed to stimulate the economy.

Asian spot liquefied natural gas prices were up last week on continued demand growth from Japan, South Korea and India as large utilities sought to replenish stocks. The increased competition has narrowed the spread with European gas prices on the Dutch TTF hub, where prices went down after concerns over further Russian gas cuts eased.

The average LNG price for July delivery into north-east Asia was estimated at $24.75 per metric million British thermal units (mmBtu), up $1.35 from the previous week, industry sources said. The market has been a little more stable recently compared with the volatility of earlier months, although still at high prices, analysts said.

The market is expected to continue in this mood in the near term, with Continental European prices strongest as storage injections continue, Asia a little lower as COVID-19 lockdowns dent Chinese demand, and the UK lower again as it has constraints on its demand due to lack of storage capacity, they added.

Meanwhile, Russia's Gazprom cut off gas supplies to Denmark's energy company Orsted, and to Shell Energy for its contract to supply gas to Germany, citing the companies' failure to make payments in roubles.

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