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Title: Oil prices gain slightly as OPEC+ plan disappoints

Jun 03, 2022 02:55AM ET

By: AnalysisWatch

Oil prices rose slightly on Friday as markets overlooked OPEC+'s decision to increase production and wondered whether the extra output will offset supply losses from Russia and meet rising demand from China amid the easing of COVID restrictions.

US West Texas Intermediate (WTI) oil futures gained 7 cents to $116.94 per barrel at 0640 GMT, while Brent oil futures rose 18 cents to $117.79 per barrel.

Thursday's decision by the Organization of the Petroleum Exporting Countries and allies, collectively called OPEC+, to increase production by 648,000 barrels per day (bpd) in July and August, instead of 432,000 bpd as previously agreed, was seen as hardly enough for a tense market.

The increases were shared proportionally among member countries, but with Russia included in the pact and members such as Angola and Nigeria already failing to meet their targets, analysts said supply growth was likely to be less than the announced volume.

Russia's output has already fallen by 1 million bpd since its invasion of Ukraine, which Moscow calls a "special military operation", and is likely to fall further as the European Union's ban on Russian oil takes effect, ANZ analysts said.

With the number of daily COVID-19 cases falling, China's financial hub, Shanghai, and the capital Beijing, relaxed COVID-19 restrictions this week. China's central government has pledged broad support to boost the country's economy, which is expected to target fuel-intensive sectors such as infrastructure and real estate construction.

Analysts warned, however, of downside risks to demand and oil prices as Beijing has not changed its stance on COVID-19 rules.

Although Brent was on track to fall for the week, WTI was on track for its sixth weekly rise as US supply is seen as very tight, prompting talk of limiting fuel exports or a windfall profits tax on oil and gas producers.

Government data on Thursday showed US crude oil inventories fell much more than expected in the week to May 27, and gasoline stocks fell, defying expectations for an increase.

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