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Despite OPEC+'s promise to increase output, oil prices have stabilized; supply remains tight

Image: Reuters Berita 24 English - Oil rose on Friday, boosted by forecasts that OPEC's decision to raise output objectives slightly hig...

Image: Reuters

Berita 24 English - Oil rose on Friday, boosted by forecasts that OPEC's decision to raise output objectives slightly higher than planned will not add significantly to global supply, which is expected to tighten as China relaxes COVID restrictions.

On Thursday, the Organization of Petroleum Exporting Countries and Allies (OPEC+) decided to increase output by 648,000 barrels per day (bpd) per month in July and August, rather than the 432,000 bpd originally agreed.

By 1338 GMT, Brent crude had risen $2.11, or 1.8 percent, to $119.72 per barrel. The price of West Texas Intermediate (WTI) crude in the United States increased by $2, or 1.7 percent, to $118.87. In after-hours trade, both benchmarks were up $3.

Due to constrained supply in the United States, U.S. crude gained for the sixth week in a row, prompting speculation of fuel export restrictions or a windfall tax on oil and gas companies.

"Today's OPEC+ decision, as well as the continuous acceleration in SPR releases, are keeping crude availability at a sufficient level, especially with refiner demand shrunk much from a few years ago," said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

Because OPEC+ shared the increase among its members and still included Russia, whose output is declining as sanctions have caused some countries to avoid buying its oil since the invasion of Ukraine, the output gain could fall short of the committed amount.

President Joe Biden has officially stated that he may travel to Saudi Arabia in the near future, a trip that is expected, according to various sources, and might involve talks with Saudi Crown Prince Mohammed bin Salman.

The visit would be focused at improving US-Saudi relations as Biden looks for measures to reduce fuel prices in the United States.

The White House claimed on Wednesday that Biden still considered bin Salman a "pariah" for his role in the killing and dismemberment of a political opponent, Washington Post journalist Jamal Khashoggi, in Turkey in 2018.

Supplies are still scarce. Crude stockpiles declined by 5.1 million barrels more than projected, according to a weekly inventory data released by the United States on Thursday. Stockpiles of gasoline have also decreased. 

In the week ending June 3, oil and natural gas rigs in the United States remained constant at 727, according to Baker Hughes Co BKR.N's carefully watched report.

Demand is also on the rise. COVID-19 limitations have been loosened in China's financial hub Shanghai and capital Beijing, and the Chinese government has promised to promote the economy.

After U.S. data showed employment expanded more than expected in May, indicating a tight job market, oil prices maintained steady.

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