Oil prices rose on Friday after OPEC agreed a modest increase in output to compensate for losses in production amidst rising global demand, Reuters reports.
Benchmark Brent crude LCOc1 jumped $2.29 a barrel, or 3.1 percent, to a high of $75.34 before slipping to around $74.60 by 1345 GMT. U.S. light crude CLc1 was $1.90 higher at $67.44.
The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after its de facto leader Saudi Arabia persuaded arch-rival Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.
The group agreed OPEC and its allies led by Russia should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply, OPEC sources said.
The real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas, while other producers may not be able to fill the gap.
The deal looked to be broadly in line with expectations.
Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut.
“The effective increase in output can easily be absorbed by the market,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
Oil prices have been on a roller-coaster ride over the last few years, with the international marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 and then recovering to over $80 last month.
The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories.
The group started withholding supply in 2017 and this year, amid strong demand, the market tightened significantly, triggering calls by consumers for higher supply.
Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of U.S. sanctions, have all increased market worries of a supply shortage.
Another big uncertainty for oil is the escalating dispute between the United States and its trading partners, which could hit U.S. crude oil exports to China.
Asian shares hit a six-month low on Friday as tariffs and the U.S.-China trade battle start taking their toll.
If a 25 percent duty on U.S. crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.