OPEC+ raises output faster-than-expected as Russia's war roils global energy markets

OPEC and its oil-producing allies agreed on Thursday to hike output in July and August by a larger-than-expected amount as Russia's invasion of Ukraine wreaks havoc on global energy markets.

OPEC+ will increase production by 648,000 barrels per day in both July and August, bringing forward the end of the historic output cuts OPEC+ implemented during the throes of the pandemic.

The group has been slowly returning the nearly 10 million barrels per day it agreed to pull from the market in April 2020. In recent months, output has risen between 400,000 and 432,000 barrels per day each month.

Oil prices reversed early losses and traded higher at 9:45 a.m. on Wall Street. West Texas Intermediate crude futures, the U.S. oil benchmark, added 0.75% to trade at $116.13 per barrel. International benchmark Brent crude was 0.5% higher at $116.90 per barrel.

The decision comes as the world grapples with surging energy prices. Governments, including the Biden Administration, have been calling on producers to raise output in an effort to dampen oil's wild ride.

Still, the group has already been struggling to meet output quotas, and returning more oil to the market will not make up for the potential loss of more than one million barrels per day from Russia as worldwide nations ramp up sanctions against the country.

In March crude hit the highest since 2008, and has stayed firmly above $100. The rapid rise is a major contributor to decades-high inflation that's happening across economies. On Thursday the national average for a regular gallon of gasoline in the U.S. hit another record high of $4.71.

Oil prices had moved lower earlier in the session following a report from The Financial Times, citing sources, that Saudi Arabia is aware of the risks of a supply shortage and that it is "not in their interests to lose control of oil prices."

EU leaders on Monday agreed to ban 90% of Russian crude by the end of the year as part of the bloc's sixth sanctions package on Russia since it invaded Ukraine.

Sources told the FT that Saudi Arabia, OPEC's de facto leader, has not yet seen genuine shortages in the oil markets. It has so far ignored pressure from Washington to speed up production increases as oil prices soared this year.

But that situation could change as economies globally reopen amid the pandemic recovery, driving demand for crude.

That would include China, the world's largest oil importer, where major cities are starting to ease restrictions as daily Covid cases taper off.

"Whilst it's not an outright promise, Saudi Arabia [has] seemingly thrown the West a bone," Matt Simpson, market analyst at U.K.-based trading platform City Index, wrote in a note following the news.

"This will be well received by Western leaders given inflation – and inflation expectations – remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession," he added.