Oil reverses losses as OPEC+ agrees on supply increase plan

Oil reversed losses to trade near $116 as OPEC+ ministers agreed to boost supply increases by around 50%, after prices dropped on reports President Joe Biden is likely to visit Saudi Arabia this month and that the kingdom is ready to pump more crude, Bloomberg News reports.

Ministers from the group agreed to add 648,000 barrels a day of oil to the market in July and August, up from 432,000 barrels a day in recent months, delegates said.

The earlier decline followed a steep rise in prices last month and comes amid signs that the strained relationship between Saudi Arabia, the world’s biggest oil exporter, and the U.S. is improving. Biden will almost inevitably meet de facto Saudi ruler Crown Prince Mohammed bin Salman, who he has so far shunned, if he does travel to the country. That may pave the way for a production boost from the kingdom and help lower U.S. fuel prices, which have soared to record highs, putting pressure on Biden ahead of November’s midterm elections.

The Financial Times reported Riyadh had indicated to Western allies that it’s prepared to increase oil supply.

If the Saudis do pump more it would be a turnaround. The kingdom’s foreign minister said last week that there was nothing more it could do to tame oil markets, and even suggested there was no shortfall of crude. OPEC+ was expected to rubber-stamp a production boost of 430,000 barrels a day for next month, although the alliance has struggled to meet its targets in recent months.

It is now possible that the 23-nation group accelerates its monthly increases, according to RBC Capital Markets.