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Why Oil Prices Could Spike Next Week

U.S. West Texas Intermediate crude oil futures are trading higher on Friday on reports that OPEC and its allies will ignore President Biden’s request to boost supply at next week’s production meeting. A weaker U.S. Dollar and stronger risk sentiment is also lending support at the close of the week.

Crude oil traders have been reacting positively to the hope that U.S. monetary tightening would not be as hawkish as initially expected after disappointing economic growth figures were released on Thursday.

Another big event driving the price action is that front-month Brent futures are selling at a rising premium to the deferred months in a market structure known as backwardation, indicating tight current supply.

This is being caused by the tight supply situation in Europe due to sanctions against Russia, and its slowdown of supply to a key pipeline into Germany.

Chances of OPEC+ Supply Boost Dim

The next surge in prices could come next week after the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+, on August 3.

OPEC+ sources told Reuters the group will consider keeping oil output unchanged for September, with two OPEC+ sources saying a modest increase would be discussed.

The decision not to raise output would dampen U.S. efforts to drive down domestic gasoline prices after U.S. President Joe Biden visited Saudi Arabia this month hoping to strike a deal…

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