Oil prices rose on Friday, heading for a fifth straight week of gains, with demand growth seen outstripping supply on bets that OPEC+ producers will be cautious in returning more output to the market from August.
U.S. West Texas Intermediate (WTI) crude futures rose 18 cents, or 0.25%, to $73.48 a barrel, headed for a 2.4% gain for the week.
Brent crude futures climbed 10 cents, or 0.13%, to $75.66 a barrel, headed for a 2.9% jump for the week.Both benchmark contracts hit their highest since October 2018 on Thursday.
All eyes are on the Organization of the Petroleum Exporting Countries, Russia and allies – together called OPEC+ – who are due to meet on July 1 to discuss further easing of their output cuts from August.
“(The market) certainly has momentum behind it…It’s really in the hands of OPEC+,” said Commonwealth Bank commodities analyst Vivek Dhar.
On the demand side, the key factors OPEC+ will have to consider are strong growth in the United States, Europe and China, bolstered by vaccine rollouts and economies reopening, offset by rising COVID-19 cases and outbreaks in other locations, analysts said.
“The question is what does OPEC+ do knowing that information. That’s going to determine where oil prices go,” Dhar said. “The risk is they end up being too conservative and we get (supply) deficit conditions past August.”
ANZ analysts predicted OPEC+ would step up supply with a small increase of 500,000 barrels per day in August, adding to the 2.1 million bpd they agreed to return to the market from May through July.
“We expect the OPEC+ alliance will try to balance the market’s need for more supply against the fragile nature of the recovery in demand at next week’s meeting,” ANZ analysts said in a note to clients.
The prospect of sanctions being lifted on Iran and more of its oil hitting the market anytime soon has dimmed, with a U.S. official saying “serious differences” remain over a range of issues over Iran’s compliance with the 2015 nuclear deal.