OPEC+ will meet Thursday to discuss output quotas for August and potentially beyond as oil prices hit three-year highs.
Analysts estimate that the group, which includes companies in the Organization of the Petroleum Exporting Countries and nonmember Russia, will agree to boost production by 500,000 barrels per day in August.
That would mark further acceleration in output, after OPEC+ agreed earlier this month to lift production by 350,000 barrels per day in June and by 441,000 bpd in July.
“The fact that oil prices only seem to go up recently highlights the extent to which the demand outlook is outstripping supply,” wrote Sophie Griffiths, Oanda market analyst, in her daily report Friday. “Current fundamentals are supportive of further gains. With economies reopening, fuel demand picking up and this increase in demand being met with limited supply — it screams bull market all the way.”
Meanwhile, India has called for increases in the global crude supply as the world’s No. 3 oil consumer seeks to avoid an economic headwind. India has warned OPEC that rising oil prices could hit its recovery from the coronavirus pandemic.
Saudi Energy Minister Abdulaziz bin Salman said at a conference June 24 that OPEC+ has a role in containing global inflation, according to Bloomberg.
Oil prices have hit their highest level since 2018. On Friday, Brent rose 0.8%, settling at $76.18 a barrel. U.S. crude climbed 1% to settle at $74.05 a barrel.
Exxon Mobil (XOM) shares edged up 0.2% on the stock market today, and Chevron (CVX) added 0.15%. Among top shale stocks, EOG Resources (EOG) rose 1.8%, Continental Resources (CLR) rallied 3.7%, and Diamondback Energy (FANG) gained 2.2%.
Iran Question Looms Over Oil Prices
The potential return of Iranian crude to the market has been hanging over oil prices this year. But recently, that prospect has started to fade.
Talks between Iran and Western powers are expected to continue soon to revive the nuclear deal that the U.S. left in 2018. The Joint Comprehensive Plan of Action lifted sanctions on Iranian oil in return for limits on Tehran’s nuclear program.
But a senior U.S. State Department official told the media Thursday that there are still differences between the two sides and if progress isn’t made in the “foreseeable future, we’re going to have to regroup.”
The uncertainty around Iran could be good news for OPEC+.
“They say they could make a decision to return to the deal but we are still waiting,” Phil Flynn, senior market analyst for the Price Futures Group, wrote in a note Friday. “That will make OPEC+ job a lot easier because let’s face it, the cartel wants higher prices and that’s exactly what they are getting.”
Follow Gillian Rich on Twitter for energy news and more.
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