Oil prices settled higher Monday, getting a lift from expected supply disruptions in Iran and Venezuela, even after a report of rising crude output from Saudi Arabia ahead of a much-anticipated producer meeting later this month.
“It remains to be seen if the new production levels [in Saudi Arabia] will just cover the previous loss of output from other countries or if they will create oversupply,” said Fiona Cincotta, senior market analyst at City Index, in emailed commentary.
Late Friday, The Wall Street Journal reported that the most influential member of the Organization of the Petroleum Exporting Countries, Saudi Arabia, had begun to increase its output after two years of leading efforts to curtail global output, with the kingdom boosting production in recent weeks by more than 100,000 barrels a day. That has raised Saudi overall output to about 10 million barrels a day, the report indicated.
The initial reaction to the report Monday was “fairly neutral,” with Brent crude trading modestly higher, said Cincotta. In the U.S., WTI gained “even though domestic data showed U.S. oil producers have increased the number of active rigs for a third week running.”
After swinging between losses and gains, U.S. benchmark July West Texas Intermediate crude CLN8, +0.55% rose 36 cents, or nearly 0.6%, to settle at $66.10 a barrel on the New York Mercantile Exchange. The commodity logged a weekly loss of 0.1% based on Friday’s close for WTI, marking its third weekly fall in a row, according to FactSet data.
August Brent crude LCOQ8, -0.09% the global benchmark, settled flat at $76.46 a barrel on the ICE Futures Europe exchange, after a weekly slide of 0.4%.
The reported increase in Saudi output comes after Baker Hughes BHGE, -1.44% on Friday reported that the number of active U.S. rigs drilling for oil inched up by 1 to 862. The rise follows gains in the previous two weeks. The total active U.S. rig count, which includes oil and natural-gas rigs, added 2 to 1,062.
Elsewhere, Russia reportedly increased its crude output to 11.1 million barrels a day in June, above its agreed production cap of 10.95 million barrels a day, according to Interfax.
“This appears a clear sign from Russia that the time has come to ease production cuts,” according to analysts at ING Bank.
Signs of elevated production come ahead of a closely watched meeting of crude-oil producers set for June 22 in Vienna.
“Russia serves as the de facto leader of the non-OPEC contingent under the current OPEC/non-OPEC production deal, which could start to unwind over the second half of the year,” said Robbie Fraser, commodity analyst at Schneider Electric. “Though Saudi Arabia and Russia appear to be aligned on the idea of lifting production and possibly offsetting further declines from Iran and Venezuela, there is still little guarantee of broad consensus coming out of OPEC’s formal meeting later this month.”
OPEC and 10 producers outside the cartel, including Russia, have been holding back output by around 1.8 million barrels a day since the start of last year. The coordinated supply cuts have helped to boost crude prices by more than 40%. But geopolitical risks to supply out of Iran and Venezuela—two OPEC members—prompted Saudi Arabia and Russia to indicate in recent weeks they could open the taps sooner than planned.
July natural gas NGN18, +1.83% meanwhile, rose 2% to $2.949 per million British thermal units, rebounding after losing 2.4% last week.
—Mark DeCambre contributed to this report