Oil price rises as OPEC backs higher output

By: AFP
Published: 08:34 PM, 2 Jun, 2022
Oil price rises as OPEC backs higher output
Caption: Oil price rises as OPEC backs higher output.
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Oil prices rose Thursday even as major crude producers agreed to boost output by more than the usual amount following an EU ban on Russian imports.

European shares rose in mid afternoon trading, with Frankfurt edging 0.6 percent higher and Paris up by more than one percent. London's FTSE 100 was shut for a holiday.

Wall Street stocks were little changed early Thursday following mixed labour data and a Microsoft earnings warning.

All eyes were on Vienna where the OPEC+ group of major oil producers, led by Saudi Arabia and Russia, agreed to boost oil output more than expected in light of the Russian invasion of Ukraine.

Producers had been expected to stick to their policy of only increasing output modestly, as they have done since May 2021.

But, amid soaring prices and hard on the heels of the EU ban on most Russian oil imports, pressure has been rising for the 23-member cartel to boost output to stabilise prices.

In the end, the group agreed to add 648,000 barrels per day to the market in July, up from 432,000 in previous months.

The move did not appear to be enough to calm oil markets, with the benchmark Brent crude up 0.4 percent at $116.79 per barrel and West Texas Intermediate also 0.5 percent higher at $115.80.

Soaring energy prices have fuelled growing inflation around the world, hampering economic growth and prompting central banks to hike rates. 

Earlier in the day, oil prices had fallen more than two percent after a Financial Times report said that Saudi Arabia was considering a plan to boost output as Russia struggles to meet targets owing to Ukraine war-linked sanctions.

The FT report followed a Wall Street Journal article saying OPEC was considering removing Russia from an agreement that has locked producers into limited output increases, which analysts said could lead to an early end of the pact and allow nations to open the taps more.

Concerns about tighter Russian supplies have sent crude soaring this year, just as demand picks up owing to the reopening of economies but Riyadh has ignored previous calls to pump more. 

"One can expect trading activity involving oil to remain volatile," Patrick J. O'Hare of Briefing.com said.

Brace yourself

Asia was mostly in negative territory. Hong Kong shed one percent, while Tokyo, Sydney, Seoul, Singapore, Wellington, Manila, Jakarta and Taipei were also well down. Shanghai and Mumbai edged up.

Concern over the outlook was shared by Wall Street titan Jamie Dimon, who warned that the wave of unprecedented crises were combining to cause an economic superstorm.

"That hurricane is right out there down the road coming our way," the JPMorgan Chase & Co boss said. "We don't know if it's a minor one or Superstorm Sandy. You better brace yourself."

However, in sign of the huge uncertainty coursing through markets, a top strategist at the bank, Marko Kolanovic, painted a more positive picture, forecasting a market recovery through 2022.

"We remain positive on risky assets due to near record-low positioning, bearish sentiment, and our view that there will be no recession given support from US consumers, global post-Covid reopening, and China stimulus and recovery," he wrote in a note.

AFP

Agence France-Presse is an international news agency.