Oil prices edged higher today after US crude inventories fell more than expected amid high demand for fuel and OPEC+ agreed to boost crude output to compensate for a drop in Russian production.
US crude oil stockpiles fell last week by 5.1 million barrels to 414.7 million barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel drop.
Brent LCOc1 futures rose $1.16, or 1%, to $117.45 a barrel by 1606 GMT, while US West Texas Intermediate (WTI) crude rose $1.51, or 1.3%, to $116.77.
Prices, however, were also supported by the European Union's sixth package of sanctions against Russia, approved on Thursday, which will include an immediate ban on new insurance contracts for ships carrying Russian oil and a six month phase-out on existing contracts.
The benchmarks have mostly marched higher for several weeks as Russian exports have been squeezed by US and EU sanctions against Moscow over its Feb 24 invasion of Ukraine, an action Moscow calls a "special military operation."
The market has also seen support from China's gradual emergence from strict Covid-19 lockdowns.
Oil prices fell earlier on Thursday ahead of the OPEC+ meeting on expectations Saudi Arabia and other OPEC members could boost oil output to offset a drop in Russian production.
The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, agreed to raise output by 648,000 barrels per day (bpd) in July and 648,000 bpd in August, a source told Reuters.
"While OPEC+ agreed to increase their production quota by a bit more than the market expected, in reality it does very little to add additional supplies as OPEC+ was already falling short of its existing quotas by over 2 million barrels per day," said Andrew Lipow, president of Lipow Oil Associates in Houston.
Russian production has fallen by around 1 million bpd following sanctions.
One OPEC+ source familiar with the Russian position said Moscow could agree to other producers raising production to compensate for its lower output but not necessarily making up all the shortfall.
The Kremlin says it can re-route oil exports to minimize losses from EU sanctions, but analysts remain skeptical.
"The extent to which this will prove achievable is questionable, however. Russian oil production is therefore likely to fall again in the coming months," said Commerzbank analyst Carsten Fritsch, who also questioned OPEC+'s ability to add considerably more oil to the market.