Oil prices rise ahead of OPEC+ austerity decision

LONDON (Reuters) – Oil prices rose Thursday, supported by lower U.S. inventories and the prospect of recovering demand, as investors await a decision from OPEC+ producers on whether to maintain or ease supply constraints in the second half of the year. year.

Brent oil rose 94 cents, or 1.3%, to $75.56 a barrel at 0910 GMT. US West Texas Intermediate crude rose 93 cents, or 1.3%, to $74.40.

WTI rose more than 10% in June, while Brent added more than 8%, reaching its highest level since October 2018.

Analysts expect oil demand to pick up in the second half of the year as more people are vaccinated against COVID-19 and travel restrictions are eased.

The first half of the year paved the way for further improvement and growth in the economy and oil demand, said Tamas Varga, an oil analyst at the London brokerage PVM Oil.

The OPEC+ group of oil producers will meet on Thursday to decide on further easing of production cuts next month and may also consider extending the overall supply pact beyond April 2022, sources within the group told Reuters.

The group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, warned on Wednesday of significant uncertainties and the risk of an oil surplus next year.

Given the sharp increase in demand that we expect for this summer, we think the group will increase production modestly. Still, the oil market will remain undersupplied, said UBS analyst Giovanni Staunovo, who predicts larger falls in oil inventories will push prices up in the third quarter.

Russia would like to increase the supply, while Saudi Arabia wants a more cautious approach, ANZ analysts said in a note.

Outbreaks of the Delta variant of the coronavirus meanwhile lead to concerns that the demand recovery could falter. Renewed lockdowns and rising costs weakened momentum in Asian factory activity in June.

In the United States, crude oil inventories fell for the sixth consecutive week last week in response to rising demand, data from the Energy Information Administration shows.

A drop in crude oil inventories in Cushing, Oklahoma, the delivery point for WTI, to their lowest since March 2020, also supported the US benchmark, pushing the discount on Brent to its lowest since September 2020 on Wednesday. [EIA/S]

A Reuters poll last month found that Brent was expected to average $67.48 a barrel this year and WTI $64.54, both higher than May forecasts.