Oil is falling after the OPEC+ decision to increase production

Oil prices fell on Friday after the OPEC+ group decided to increase production targets a little more than planned, but global supply shortages and increased demand as China eased Covid-19 restrictions curbed losses.

The OPEC + bloc, which includes the Organization of the Petroleum Exporting Countries (OPEC) and independent oil producers, including Russia, decided to increase production by 648,000 barrels per day in July and August, instead of 432,000 barrels per day, according to a previous agreement.

Brent crude fell 85 cents, or 0.7 percent, to $116.76 a barrel by 0925 GMT, after rising $2 during trading on Thursday. US West Texas Intermediate crude fell 88 cents, or 0.8 percent, to $115.99 a barrel.

Although Brent crude is on track to record a decline this week, US crude is set for the sixth week of gains thanks to US supply shortages, which has fueled talk of fuel export restrictions or an unexpected tax on oil and gas producers.

However, expectations of continued supply shortages limited the losses. OPEC + divided the increase among its members, including Russia, whose production decreased due to sanctions and some buyers avoided its oil production due to the invasion of Ukraine, indicating that the increase will not achieve the desired goal.

Thursday’s weekly inventory report showed that US crude stocks fell by 5.1 million barrels, more than expected, and gasoline stocks also fell, underlining the supply shortage.

Support also came from high demand. With daily COVID-19 cases declining, Shanghai, China’s financial hub, and the capital, Beijing, eased anti-coronavirus restrictions this week. The Chinese government has pledged support to stimulate the economy.