Oil Price Fundamental Daily Forecast – Smaller than Expected OPEC+ Output Hike Expectations Driving Prices Up

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday, hovering near a three-year high ahead of a decision from key producers on production policy for the second half of 2021.

The markets are being underpinned by increasing demand as drivers take to the roads amid the global economic reopening. A rebound in shipping and air travel also contributed to the higher prices.

At 15:00 GMT, September WTI crude oil is trading $74.21, up $1.43 or +1.98% and September Brent crude oil is at $75.72, up $1.10 or +1.47%.

Gasoline prices are jumping on the back of a post-pandemic driving spree and $75 crude prices could mean even higher prices at the pump, Reuters reported. The current average price for a gallon of unleaded gasoline is at $3.123 per gallon, compared to $2.179 per gallon a year ago, according to AAA.

OPEC+ Could Add 2 Mln Bpd of Oil to Market by December, Says Source

OPEC+ is moving towards gradually adding about 2 million barrels per day (bpd) to the oil market from August to December, an OPEC+ source told Reuters as the group eases back on output curbs amid a recovering global economy and an oil price rally.

The source told Reuters that monthly increases would amount to less than 0.5 million bpd. Another OPEC+ source said top OPEC producer Saudi Arabia and top non-OPEC producer Russia had a preliminary agreement for a deal on easing output curbs from August.

Daily Outlook

WTI and Brent crude oil are rallying on the expected news because some traders had expected a bigger output rise in August. Sources told Reuters they would decide policy from August and could also consider extending their overall pact on supply restraint beyond April 2022.

The outlined increase “would keep the market tight this summer, with still rising demand over the coming weeks”, UBS analyst Giovanni Staunovo said, adding that consensus had been for an addition of 0.5 million bpd a month or slightly more.

In other news, an OPEC+ panel on Tuesday said it expected oil demand to grow by 6 million bpd in 2021 but flagged risks of a glut in 2022, saying there were “significant uncertainties” including an uneven global recovery and rising cases of the Delta variant of the coronavirus.