Oil Jumps As OPEC Agrees To Modest Output Hikes
NEW YORK, June 22 (Reuters) - Oil prices soared on Friday after oil producers agreed to modest crude output increases to compensate for losses in production at a time of rising global demand.
The Organization of the Petroleum Exporting Countries and other top crude producers, meeting in Vienna, agreed to raise output from July by about 1 million barrels per day (bpd).
The real increase, however, will be around 770,000 bpd, according to Iraq, because several countries that recently suffered production declines will struggle to reach full quotas, while other producers may not be able to fill the gap.
The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting.
"There was a lot of anticipation in the market that there was going to be a lot of new oil coming to market, and that isn't going to happen, at least for now," said John Kilduff, a partner at Again Capital.
"We were teased with an increase of about 1.8 million barrels (per day) at one point, and we ended up getting about 600,000," Kilduff said.
Brent crude settled up $2.50, or 3.4 percent, to $75.55 a barrel.
U.S. crude rose $3.04, or 4.6 percent, to $68.58 a barrel, getting an additional boost after a surprise large drawdown at the storage hub at Cushing, Oklahoma.
Brent crude was up 2.7 percent on the week, while U.S. crude was up 5.5 percent.
In post-settlement trading, both U.S. and Brent crude continued to strengthen. Brent rose $2.56 or 3.5 percent to $75.61, and U.S. crude traded $3.70, or 5.65 percent to $69.23 a barrel by 4:07 p.m. EDT [1807 GMT].
U.S. crude's discount to Brent
For about three weeks ahead of the OPEC meeting, prices had retreated from 3-1/2-year highs on fears that larger production increases could lead to oversupply.
Ultimately, Saudi Arabia persuaded Iran to cooperate with the plan to cut output, following calls from major consumers to curb rising fuel costs.
OPEC's decision confused some in the market as the producers gave opaque targets for the increase, making it difficult to understand precisely how much more it will pump. The expectation that the increase will fall short of the 1 million bpd figure boosted the market.
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