Oil prices rise on tight supply as attention turns to OPEC+ meeting

Oil prices gained about $1 in early trade on Friday, lifted by supply concerns and a weaker U.S. dollar as attention turns to what OPEC and allies including Russia agree at a meeting next week marking the end of their 2020 output reduction pact.

U.S. West Texas Intermediate (WTI) crude futures for September delivery rose $1.09, or 1.1%, to $97.51 a barrel by 0041 GMT, reversing losses from the previous session when sentiment was hit by fears of a recession in the United States.

Brent crude futures for September settlement, due to expire on Friday, rose 86 cents, or 0.8%, to $108.00 a barrel. The more active October contract climbed 87 cents, or 0.9%, to $102.70.

Brent is on course to climb nearly 5% for the week in its second straight weekly gain, while WTI is on track for a nearly 3% rise for the week, recouping the previous week’s losses.

“Oil prices have little chance of (posting) deep losses on the back of a weak U.S. dollar and the ongoing supply crunch,” said CMC Markets analyst Tina Teng.

Oil typically rises when the dollar falls as a weaker dollar makes crude cheaper for buyers holding other currencies.

The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together called OPEC+, on Aug. 3 will be key as the producers have now unwound the record 9.7 million barrels per day (bpd) supply cut they agreed in April 2020, when the COVID-19 pandemic slammed demand.

OPEC+ sources said the group will consider keeping oil output unchanged for September, but two OPEC+ sources also told Reuters a modest increase would be discussed.

A decision not to raise output would disappoint the United States after U.S. President Joe Biden visited Saudi Arabia this month hoping to strike a deal on oil production.

A senior U.S. administration official said on Thursday the government was optimistic about the OPEC+ meeting, and said extra supply would help stabilise the market.

Analysts, however, said it would be difficult for OPEC+ to boost supply much given that many producers are struggling to meet their production quotas due to a lack of investment in oil fields.

“OPEC production is constrained, though supplies are stabilising in Libya and Ecuador. Under-investment in many member countries will keep production constrained,” ANZ Research analysts said.