UPDATE 8-Oil settles up despite OPEC+ output hike plan; supply still tight

New throughout, updates prices, market activity and comments to settlement

By Laura Sanicola

June 3 (Reuters) – Oil settled higher on Friday, supported by expectations that OPEC’s decision to increase production targets by slightly more than planned will not add that much to global supply which should tighten as China eases COVID restrictions.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, on Thursday agreed to boost output by 648,000 barrels per day (bpd) a month in July and August rather than 432,000 bpd as previously agreed. nL1N2XP08U

Brent crude LCOc1 rose $2.11, or 1.8%, to settle at $119.72 a barrel by 1338 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 advanced $2, or 1.7%, to $118.87. Both benchmarks were up by $3 in after hours trading.

U.S. crude notched a sixth weekly gain on tight U.S. supply, which has prompted talk of fuel export curbs or a windfall tax on oil and gas producers. nL1N2XP1J9 nL2N2XG1NC

“Yesterday’s OPEC+ decision and the ongoing acceleration in SPR releases is maintaining crude availability at an ample level especially with demand from the refiners appreciably downsized from a few years ago,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

The output hike could undershoot the pledged amount since OPEC+ divided the hike across its members and still included Russia, whose output is falling as sanctions have prompted some countries to avoid buying its oil since the invasion of Ukraine.

President Joe Biden publicly acknowledged that he may travel to Saudi Arabia soon, a trip multiple sources said was expected and could include talks with Saudi Crown Prince Mohammed bin Salman.

The visit would be aimed at bolstering U.S.-Saudi relations as Biden seeks ways to lower U.S. gasoline prices. nL1N2XQ1AL

As recently as Wednesday, the White House said Biden still felt bin Salman was a “pariah” for what U.S. intelligence says was his role in the killing and dismembering of a political opponent, Washington Post journalist Jamal Khashoggi, in Turkey in 2018.

Supplies remain tight. On Thursday, a U.S. weekly inventory report showed crude stockpiles fell by a more-than-expected 5.1 million barrels. Gasoline inventories also dropped. EIA/S

U.S. energy firms this week left oil and natural gas rigs unchanged at 727 in the week to June 3, Baker Hughes Co BKR.N said in its closely followed report on Friday. nL1N2XN18M

Demand is rising too. China’s financial hub Shanghai and capital, Beijing, have relaxed COVID-19 restrictions and the Chinese government has vowed to stimulate the economy.

Oil held gains after U.S. data showed employment increased more than expected in May, signs of a tight labor market. nL1N2XP2AO

(Additional reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore; Editing by Kirsten Donovan, Edmund Blair and David Gregorio)

((Laura.sanicola@tr.com))