Oil slips as Opec+ surprises with output hike

London — Oil slipped on Friday after Opec+ decided to increase production targets by slightly more than planned, though tight global supply and rising demand as China eases its Covid-19 restrictions limited the decline.

The Organization of the Petroleum Exporting Countries and allies, or Opec+, on Thursday increased their output boost to 648,000 barrels per day (bpd) in July and August rather than 432,000 bpd as previously agreed.

Still, expectations that supply will stay tight limited losses. Opec+ divided the hike across its members and still included Russia, whose output is falling due to sanctions and some buyers avoiding its oil over the invasion of Ukraine, suggesting the boost will undershoot.

“Given most of Opec can’t even meet their present targets, with only Saudi Arabia, the UAE, and possibly Iraq, having any sort of spare capacity, and with Russia under sanctions, the entire exercise was nothing more than window dressing,” said Jeffrey Halley of brokerage Oanda.

Brent crude fell 51c, or 0.4%, to $117.10 a barrel by 8.42am GMT, while US West Texas Intermediate (WTI) crude slipped 57c, or 0.5%, to $116.30.

Though Brent was on track to fall for the week, US crude was heading for a sixth weekly gain on tight US supply, which has prompted talk of fuel export curbs or a windfall tax on oil and gas producers.

A weekly inventory report on Thursday showed US crude stockpiles fell by a more-than-expected 5.1-million barrels and gasoline inventories also dropped, underlining the tight supply.

Support also came from rising demand. With daily Covid-19 cases falling, China's financial hub Shanghai and capital, Beijing, have relaxed Covid-19 restrictions this week. The Chinese government has vowed support to stimulate the economy.

In focus later on Friday will be US employment data for May. Investors are looking to the report for confirmation of a slowdown in the job market, which could convince the Federal Reserve to go slow on interest rate hikes.

Reuters