Oil hits $120 as Saudi Arabia’s July price hike outpace OPEC+ deal

A drilling rig operates in an oil and natural gas production area in the Permian Basin in Lea County, New Mexico, US, February 10, 2019. REUTERS/Nick Oxford/ File photo

LONDON (Reuters) – Oil prices hit $120 a barrel on Monday after Saudi Arabia raised July crude prices amid doubts that an increase in the OPEC+ production target will help ease supply tightness.

Brent crude settled 32 cents, or 0.3 percent, at $120.04 a barrel at 0858 GMT, after touching an intraday high of $121.95.

US West Texas Intermediate crude futures rose 40 cents, or 0.3%, to $119.27 a barrel, after hitting a three-month high of $120.99.

Saudi Arabia raised the July official selling price for its main Arab light crude to Asia by $2.10 from June to $6.50, the highest price since May, when prices hit all-time highs on fears of supply disruptions from Russia. Read more

The price increase followed a decision last week by the Organization of the Petroleum Exporting Countries and its allies, called the OPEC+ community, to increase production for July and August by 648,000 barrels per day, or 50% more than previously planned.

The increased target has spread across all OPEC+ members, however, many of them have little room to increase production and among them Russia, which is facing Western sanctions.

“With only a handful of…OPEC+ participants in spare capacity, we expect OPEC+ production to increase by about 160,000 bpd in July and 170,000 bpd in August,” JPMorgan analysts said in a note.

Citibank and Barclays on Monday raised their price forecasts for 2022 and 2023, saying they expect Russian production and exports to decline by 1-1.5 million barrels per day by the end of 2022. Read more

Separately, five people familiar with the matter told Reuters that Italy’s Eni and Spain’s Repsol may start shipping small quantities of Venezuelan oil to Europe as soon as next month. Read more

Additional reporting by Florence Tan in Singapore and Sonali Paul in Melbourne. Editing by Jason Neely

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