June 6, 2022: -On Friday, Oil slipped after OPEC+ decided to increase production targets slightly over planned, although tight global supply and rising demand as China lifted Covid restrictions limited the decline.
On Thursday, the Organization of the Petroleum Exporting Countries and allies, or OPEC+, raised their output to 648,000 barrels per day (BPD) in July and August instead of 432,000 BPD.
Brent crude decreased 90 cents, or 0.8%, to $116.71 a barrel, after rising $2 intra-day. U.S. West Texas Intermediate (WTI) crude slipped $1, or 0.86%, to $115.87.
“I believe it’s just a technical move lower after yesterday’s giant post-OPEC+ rally,” said Jeffrey Halley of brokerage O.A.N.D.A. “Holidays in China, Hong Kong, Taiwan, and the U.K. impact trading volumes.”
Although Brent was on track to drop for the week, U.S. crude was heading for a sixth weekly gain on tight U.S. supply, which has prompted talk of fuel export curbs or a windfall tax on oil and gas producers.
Still, expectations that supply will stay tightly fixed losses. OPEC+ divided the hike across its members and still included Russia, whose output is falling because of the sanctions and a few buyers avoiding its oil over the invasion of Ukraine, which means the boost will undershoot.
“OPEC+ is still likely to supply much less oil to the market than agreed and thus not bring the relief that had been hoped,” said Commerzbank analyst Carsten Fritsch in a report.
An inventory report revealed U.S. crude stockpiles fell by a more-than-expected 5.1 million barrels, and gasoline inventories declined, underlining the tight supply.
The Chinese government has pledged support to stimulate the economy. Support even came from surged demand. With daily Covid-19 cases falling, China’s financial hub Shanghai and Beijing’s capital relaxed Covid-19 restrictions this week.
On Friday, in focus will be the U.S to confirm a slowdown in the job market, persuading the Federal Reserve to go slow on interest rate hikes.
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