Crude oil jumps 2% on OPEC+ output, demand prospects

Brent crude was up $1.23, or 1.7%, to $75.85 a barrel by 12:38 p.m. EDT (1638 GMT). U.S. West Texas Intermediate crude gained $1.65, or 2.3%, at $75.12.

During the session, both benchmarks reached their highest since October 2018.

At its meeting, OPEC+ members were leaning toward adding about 2 million barrels per day (bpd) to the oil market between August and December, an OPEC+ source told Reuters. Monthly output increases by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, would amount to less than 500,000 bpd.

“I firmly believe that in the near term OPEC+, led by Saudi Arabia, is looking to squeeze consuming countries and engender a higher price to make up for the damage done last year,” said John Kilduff, partner at Again Capital in New York.

The U.S. benchmark was underpinned by a drop in crude inventories at Cushing, Oklahoma, the delivery point for WTI, to their lowest since March 2020.

Still, some market participants remained skeptical of the demand projection.

“Everybody is drinking the OPEC Kool-Aid here and buying the story that demand is going to increase by 5 million barrels in the second half of the year, and if that’s not somebody talking their position, I don’t know what is,” said Bob Yawger, director of energy futures, at Mizuho Securities.

Yawger said OPEC’s demand forecast does not account for the possibility of increased supply from Iran, spread of the COVID-19 Delta variant and lackluster seasonal U.S. gasoline use.

There have been several outbreaks of the Delta variant of the coronavirus, raising concerns that the recovery will falter.