SINGAPORE, June 6 (Reuters) – Oil futures gained on Monday, with Brent rising above $120 a barrel after Saudi Arabia raised prices for its crude sales in July, signalling tight supply even after OPEC+ producers agreed to accelerate output increases over the next two months.
Brent crude firmed 68 cents, or 0.6%, to $120.40 a barrel at 0640 GMT after touching an intraday high of $121.95, extending a 1.8% gain from Friday.
U.S. West Texas Intermediate (WTI) crude futures were up 61 cents, or 0.5%, at $119.48 a barrel after earlier hitting a three-month high of $120.99. It gained 1.7% on Friday.
Saudi Arabia raised the July official selling price (OSP) for its flagship Arab light crude to Asia by $2.10 from June to $6.50 premium versus the average of the Oman and Dubai benchmarks, state oil producer Aramco said on Sunday.
The July OSP is the highest since May, when prices hit all-time highs due to worries of disruption in supplies from Russia because of sanctions over its invasion of Ukraine.
The price increase came despite a decision last week by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to increase output in July and August by 648,000 barrels per day, or 50% more than planned.
Iraq said on Friday it aimed to raise output to 4.58 million bpd in July.
Oil producers are “making hay while the sun shines”, Avtar Sandu, manager of commodities at Phillip Futures in Singapore said, adding that U.S. summer driving demand and easing of COVID-19 lockdowns in China were expected to keep prices high.
The OPEC+ decision to bring forward output increases is widely seen as unlikely to meet demand as the increased allocation is spread across all members, including Russia, which is facing sanctions.
“While that increase is sorely needed, it falls short of demand growth expectations, especially with the EU’s partial ban on Russian oil imports also factored in,” Commonwealth Bank analyst Vivek Dhar said in a note.
On Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023 on tighter Russian supplies and the delayed return of Iranian oil.
Citi analysts said reconfigured flows to Asia could mean Russian production and exports would not ultimately fall so much, but more in the range of 1 million to 1.5 million bpd.
“Of 1.9 million bpd of European seaborne exports of crude oil, around 900,000 bpd could divert to other markets such as China/India or could stay in some European markets with limited access to non-Russian oil.”
Barclays expect Russian oil output to fall by 1.5 million bpd by end-2022.
Separately, Italy’s Eni and Spain’s Repsol could begin shipping Venezuelan oil to Europe as soon as next month to make up for Russian crude, five people familiar with the matter told Reuters, resuming oil-for-debt swaps halted two years ago when Washington stepped up sanctions on Venezuela.
However, the volume that the companies will receive is not expected to be large, the people said.
Reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; Editing by Himani Sarkar, Robert Birsel