Oil Jumps As New-Found Bears Shrug Off OPEC's Massive Output Boost

Analysts now think strong demand is driving the market: File Image/Pixabay

Despite the Organization of the Petroleum Exporting Countries (OPEC) boosting output more than expected for August, oil traders responded strongly to signs of strong demand – and as a result boosted prices by about 1 percent on Monday.

By 1620 GMT, Brent rose 91 cents, or 1.3 percent, to $69.20, and West Texas Intermediate climbed 57 cents, or 0.8 percent, to $67.57 per barrel.

OPEC was part of the bearish side of Monday's equation, having agreed during a meeting on Saturday to raise production by 548,000 barrels per day (bpd) next month instead of the long-planned 411,000 bpd hike.

The cartel will consider adding another 548,000 bpd in September at its next meeting on Aug. 3, according to delegates.

Also concerning the bears was Washington announcing a delay on when its tariffs would begin but not disclosing details on changes to the rates that will be imposed, as countries hurried to try and secure trading deals with the U.S.

On the bullish side were reports that a record number of Americans had travelled by road and air to celebrate the Fourth of July holiday; also, Saudi Arabia raised the August price for its flagship Arab Light crude to a four-month high for Asia, seemingly confident that the OPEC hike could be absorbed..

Even OPEC's output decision was regarded as a non-threat in some quarters, specifically, FGE, whose analysts wrote in a note that the actual month-on-month rise will be generally smaller because Iraq and Kazakhstan will be hard-pressed to significantly raise their output compared with the recent high achieved during the first quarter.

Ole Hansen, head of commodity strategy at Saxo Bank, said, "The decision to raise prices during the peak summer demand season signals that physical markets remain tight, suggesting the additional barrels can be absorbed — for now…..in the short term, downside risks to crude appear contained."

In other oil news on Monday that may sway trading in the upcoming session, a  Greek-operated bulk carrier was attacked in the Red Sea on Monday in the second Houthi strike on commercial shipping in less than 24 hours.

The Eternity C, a Liberia-flagged vessel, was hit off Yemen's Hodeidah coast and stoked fears of renewed escalation of hostilities in one of the world's most important oil transport corridors.