Oil prices keep grinding higher after The Wall Street Journal reported that OPEC and its allies are considering raising collective output by some 500,000 barrels a day when they meet next week.
The increase would represent a modest boost for the group, which cut production by 9.7 million barrels a day in the teeth of the coronavirus crisis and remains worried about the uncertain outlook for demand. Prices for West Texas Intermediate, the main grade of U.S. crude, are up more than 1% and on course to settle at their highest level since late 2018.
Why are prices rising after news of higher supplies?
There had been rumors in the market that OPEC-plus would decide to pump about a million barrels more a day, says John Kilduff, partner at Again Capital LLC, an energy-focused hedge fund. An increase half that size will still leave the market in a big deficit, meaning demand exceeds production, he says.
“The setup is favoring higher prices and 500,000 barrels a day is not going to extinguish this rally,” says Mr. Kilduff, who is betting on higher crude prices through options and futures.