Gasoline futures extended a run into record territory Friday, while oil futures logged strong weekly gains a day after traders shook off a decision by OPEC+ to raise output by larger increments in July and August.
Oil has been supported this week by China’s moves to ease a weekslong lockdown in Shanghai, a positive for crude demand. Meanwhile, government data on Thursday showed U.S. oil and product inventories fell sharply last week, reflecting in part strong implied demand for gasoline as summer driving season got under way.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed Thursday to raise output by 638,000 barrels a day in July and August, exceeding the 432,000 barrel-a-day increments previously penciled in by the group.
While the move could help fill the gap left by Russian crude exports targeted by embargoes and sanctions in response to the country’s invasion of Ukraine, it isn’t seen as enough to fully offset the expected lost barrels, analysts noted. Moreover, they noted that OPEC+ has already fallen short on previous, smaller production boosts.
Oil wasn’t pressured in the aftermath of the move “because OPEC+ merely packed the production hikes intended for the coming three months into the next two. In other words, more oil will be available to the market only in the short term, if at all,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Also, Russia remains a fully fledged OPEC+ member, despite media reports ahead of the meeting that said some members were contemplating suspending the country’s participation in the pact.
“This makes any significant increase in oil production impossible given that Russian output is likely to decline, unless other countries are allowed to ramp up their production more sharply,” Fritsch said.
President Joe Biden said Friday that he had “no direct plans” to travel to Saudi Arabia later this month.
The New York Times reported Thursday that Biden had decided to travel to Saudi Arabia this month to rebuild relations with the kingdom that he once vowed to make a “pariah” in response to the assassination of the journalist Jamal Khashoggi.
Oil-field services firm Baker Hughes on Friday said the number of U.S. oil rigs was unchanged this week at 574, while gas rigs were unchanged at 151 and miscellaneous rigs steady at 2.
If oil keeps rising, it would be great news for energy stocks—and oil exploration stocks in particular.
William Watts is MarketWatch’s senior markets writer. Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil. He also writes about global macro issues and trading strategies. Before moving to New York, he reported for MarketWatch from Frankfurt, London and Washington, D.C.
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Gasoline futures end at a record as oil shakes off OPEC+ output increase – MarketWatch
