Oil up over US$2/bbl as hopes fade for Opec+ supply boost

OIL prices settled up more than US$2 a barrel on Friday (Jul 29) as attention turned to next week's Opec+ meeting and dimming expectations that the producer group will imminently boost supply.

Brent crude futures contract for September, which expire on Friday, jumped more than US$3 a barrel during the session and then pared gains to settle at US$110.01 a barrel, up US$2.87, or 2.7 per cent. The more active October contract was up US$2.14, or 2.1 per cent, at US$103.97.

US West Texas Intermediate (WTI) crude futures settled at US$98.62 a barrel, rising US$2.20, or 2.3 per cent, after jumping more than US$5 a barrel.

Both contracts logged their second monthly losses, with Brent down about 4 per cent for July and WTI nearly 7 per cent lower.

Oil pared some gains after the release of data from oil services firm Baker Hughes, which showed that US drillers added crude rigs for a record 23 months in a row, indicating more supply ahead.

In July, the oil rig count rose 11, increasing for a record 23rd month in a row, while the gas count was unchanged after rising for 10 straight months, the Baker Hughes data showed.

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Stronger stock markets supported oil, as did a weaker dollar, which makes oil cheaper for buyers with other currencies.

"These days, there has been a lot of macro influences on the oil market with the stock market making a nice rebound and a similar fall in the dollar feeding into (today's prices)," said John Kilduff, partner at Again Capital.

Global equities, which often move in tandem with oil prices, were up on the hope that disappointing growth figures would encourage the US Federal Reserve to ease up on monetary tightening.

A Reuters survey forecast Brent would average US$105.75 a barrel this year with US crude averaging US$101.28.

Front-month Brent futures are selling at a rising premium to later-loading months, a market structure known as backwardation, indicating tight current supply.

"The oil market in Europe is considerably tighter than in the US, which is also reflected in the sharply falling Brent forward curve," said Commerzbank analyst Carsten Fritsch.

Investors will next watch the Aug 3 meeting of the Organisation of the Petroleum Exporting Countries (Opec) and allies led by Russia, together known as Opec+.

Opec+ sources said the group will consider keeping oil output unchanged for September with 2 saying a modest increase would be discussed.

A decision not to raise output would disappoint the United States after President Joe Biden visited Saudi Arabia this month hoping for a deal to open the taps.

Analysts said it would be difficult for Opec+ to boost supply, given that many producers are already struggling to meet production quotas.

Opec+ compliance with oil output cut pledges reached 320 per cent in June, Russian Interfax news agency reported, citing a source familiar with the data. It said the group's combined oil underproduction was 2.84 million barrels per day last month. REUTERS