BloombergOil prices rally :Oil prices rallied Friday, feeding a hefty gain for the week, as OPEC members agreed to raise output, but by an amount that appears likely to be less than traders had feared.
August West Texas Intermediate crude on the New York Mercantile Exchange CLQ8, +4.90% rose $2.94, or 4.5%, to $68.48 a barrel, poised for its highest finish in more than three weeks.
Prices for the contract, which became the front-month futures contract at Wednesday’s settlement, traded 5.8% higher for the week.
August Brent crude climbed $1.75, or 2.4%, to $74.80 a barrel, rebounding from Thursday’s finish at $73.05, which was the lowest for the international benchmark since April 17. The contract was set for a weekly rise of roughly 1.9%, the first such rise in a month.
News reports said oil ministers gathered for the meeting of the Organization of the Petroleum Exporting Countries in Vienna agreed to a nominal increase in production of 1 million barrels a day, but left the figure out of the final statement. An agreement to reduce overcompliance with an existing agreement on production cuts would mean the increase by OPEC members would be less than that, analysts said.
In a statement, OPEC members said they would “strive to adhere to the overall conformity level of OPEC-12, down to 100%,” as July 1.
Under the deal set in November 2016 and implemented in January 2017, 12 of the OPEC members agreed to cut their production by 1.2 million barrels of oil a day from late 2016 levels. They have cut even more than the requirement. With OPEC pegging compliance at 152% in May of this year, that’s an extra output reduction of about 624,000 barrels a day, which they plan to add back into the market.
“It appears that the intent is for OPEC to increase about 624,000 barrels a day depending on which production numbers you use,” said James Williams, energy economist at WTRG Economics.
Oil prices rally :“It is an OPEC group quota, not individual country quotas. That means that the Saudis and others will be able to make up for the inability of some members, particularly Venezuela, to produce at their previous quota,” he said. “The lion’s share will come from Saudi Arabia with most of the rest from Kuwait and United Arab Emirates.”
But Williams pointed out that the total oil added to the market “will be greater than the 624,000 b/d since we anticipate that the Russians and other cooperating countries will do the same. This means that the OPEC and non-OPEC coalition will be adding close to a million [barrels a day] to the market.”
OPEC members will officially meet with their non-OPEC allies on Saturday, beginning at 10 a.m. local time in Vienna, or 4 a.m. Eastern time. A press conference will be held at 1 p.m. Vienna time.
As Khalid al-Falih, Saudi Arabia’s energy minister, left Friday’s meeting, he said the agreement was to increase oil production by 1 million barrels a day, according to various news reports. Nigerian oil minister Ibe Kachikwu said the 1 million-barrel agreement would see OPEC members raise output by at least 700,000 barrels a day, with non-OPEC countries, led by Russia, adding the rest, according to the Financial Times.
The fact that the 1 million-barrel figure was not mentioned in the official statement suggests a possible concession to Iran, according to the report from the Financial Times. Iran faces renewed U.S. sanctions after President Donald Trump abandoned the 2015 nuclear deal with Tehran. The sanctions threaten oil supplies from Iran.
Oil prices rally :OPEC on Friday also granted membership to Congo, effective immediately. The group’s next regular meeting is set for Dec. 3 in Vienna.
In other energy products, July gasoline rose 2.1% to $2.055 a gallon, while July heating oil gained 2.1% to $2.113 a gallon. Both contracts were on track for weekly gains of more than 1%.
July natural gas gave up nearly 1.5% to $2.932 per million British thermal units, trading about 3% on the week.
—Barbara Kollmeyer and Biman Mukherji contributed to this article
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