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oil: Oil jumps 2.5% as no immediate Saudi output boost expected

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oil: Oil jumps 2.5% as no immediate Saudi output boost expected

NEW YORK (Reuters) – Oil prices rose 2.5 percent on Friday after a U.S. official told Reuters that Saudi Arabia was not expected to raise oil production immediately and investors questioned whether OPEC had room to significantly increase crude output.

Brent crude futures were up $2.50, or 2.5%, at $101.60 a barrel as of 11:39 a.m. ET (1539 GMT), while West Texas Intermediate crude was up $2.38, or 2.5%, at $101.60 a barrel. $98.16.

Both benchmarks were on track for their biggest weekly percentage declines in about a month, largely due to concerns earlier in the week that a looming recession would dent demand.

“Part of the support (today) is that everyone and their brothers who have been deep into the Saudi situation sees that they don’t have a lot of capacity,” said John Kilduff, a partner at Again Capital LLC in New York.

U.S. President Joe Biden will arrive in Jeddah later on Friday after he is expected to call on Saudi Arabia to increase oil production.

But a U.S. official told Reuters that the United States did not expect Saudi Arabia to raise oil production immediately and was watching the outcome of the next OPEC+ meeting on Aug. 3.

The comments came as spare capacity among members of the Organization of the Petroleum Exporting Countries (OPEC) is shrinking.

Still, the U.S. can ensure that OPEC will ramp up production in the coming months in hopes of signaling to the market that supplies are coming if necessary.

“The recent price slump will significantly weaken the (Biden) situation,” said Stephen Brennock of oil broker PVM.

The Fed’s most hawkish policymakers said on Thursday they favored a 75 basis-point rate hike at this month’s policy meeting, rather than a larger rate hike that traders were pricing in after Wednesday’s report showed inflation was accelerating.

Concerns that the Federal Reserve may choose to raise interest rates by 100 basis points this month and weak economic data sent Brent and WTI down more than $5 on Thursday, below their closes on Feb. 23, the day before Russia’s invasion of Ukraine, although both By the end of the meeting, the contract had recovered almost all of its losses.

However, analysts expect worries about the global economy will continue to weigh on oil.

“Brent crude oil has fallen significantly below $100 a barrel this week. Given that recession fears may not abate for now, it is likely to continue to slide,” Commerzbank said in a note.

The bearish market sentiment was also accompanied by a resurgence of the COVID-19 outbreak in China, which hampered demand recovery.

Refinery throughput in China fell nearly 10% in June from a year earlier, and output fell 6% in the first half of the year, data on Friday showed, the first annual decline since at least 2011.

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