Oil futures rose on Thursday after the Organization of the Petroleum Exporting Countries agreed to keep its collective oil output ceiling unchanged for the second half of the year at 30 million barrels per day.
The move implies a supply cut of 1.6 million bpd, OPEC Secretary-General Abdullah al-Badri said. Several OPEC members had called on Saudi Arabia, the group's top producer, to trim its excess supply to the agreed limit as a way to defend crude at $100 a barrel.
In post-settlement trading, oil rose further as the euro extended gains against the dollar after G20 officials said central banks are prepared for coordinated action to provide liquidity if needed after the Greek election on Sun day.
Oil prices on both sides of the Atlantic had fluctuated earlier, awaiting the results of the OPEC meeting and as investors fidgeted ahead of the closely watched Greek election.
The more actively traded Brent August crude ended up 45 cents at $97.17 a barrel. Post-settlement, the contract leaped to a session high of $97.79, up $1.07.
The July Brent crude expired earlier, down 10 cents at $97.03, the lowest level since January 2011.
U.S. July crude settled at $83.91 a barrel, gaining $1.29, after hitting a session high of $83.93. After settlement, it rose as high as $84.39, up $1.77. U.S. crude had ended the previous session at the lowest since Oct. 6.
"Oil prices rallied on OPEC seemingly holding together by agreeing to a production ceiling," said John Kilduff, partner at Again Capital in New York.
"It was a victory for the group that the meeting did not end in disarray," he said.
Recently strong refinery activity in the United States gave West Texas Intermediate, the U.S. benchmark, more of lift than Brent, Kilduff said, noting that Brent had been "held back by the continuing euro debt crisis, punctuated by the upcoming Greek elections".
Trading volumes were subdued, with Brent down 8 percent from its 30-day average while U.S. crude dipped 4 percent below its 30-day average, according to Reuters data.
Brent's premium against U.S. crude slimmed to below $13, the lowest since early May.
The narrowing came a day after U.S. government data showed that crude stocks at the Cushing, Oklahoma delivery hub fell last week from a record level, confirming reports that suggested last month's reversal of the Seaway pipeline was helping ship excess Midwest oil to Houston.
Earlier, Brent moved either side of unchanged, as investors believed the euro zone debt crisis was far from over, after ratings agency Moody's downgraded Spanish sovereign debt to one notch above junk status.
U.S. crude rose, initially lifted by gains on Wall Street, despite data showing that the number of Americans filing for jobless benefits rose last week for the fifth time in six weeks. The data underlined persistent weakness in the labor market in the world's largest oil consumer.
Another set of data showed that consumer prices fell in May, raising fresh hopes that the U.S. Federal Reserve would help the weakening economy though additional monetary stimulus.
SAUDI SUPPLY IMPACT
Extra Saudi oil is said to be largely responsible for lifting OPEC output to 31.6 million bpd, well above the group's formal target first set in December.
Oil prices have dropped from a $128 peak for Brent in March, and from $110 for U.S. crude, in part because the economic outlook has darkened but also because of increased Saudi output that in April set a 30-year high of 10.1 million bpd.
Raising output was a deliberate move by Riyadh to counter the possibility that Iranian oil output would fall heavily when a European Union embargo on Tehran starts next month. Iranian production is already down to a 20-year low.
Traders were cautious ahead of the Greek polls.
"The market is on a knife's edge," said Ole Hansen, senior commodity strategist at Saxo Bank. "Traders are not willing to add any new exposure ahead of that because there could be some silly moves come Sunday night," he added.
Election results favoring parties opposed to the austerity terms of a Greek bailout are expected to increase the likelihood of Greece's being thrown out of the euro zone, or choosing to leave.
Analysts said this could worsen the economic troubles in other European Union countries such as Spain and Italy and weigh on Europe's key trading partners, and lead to lower oil demand.
"Europe remains the greater concern as yields on both Italian and Spanish bonds have climbed to new highs," said Tim Evans, energy analyst at City Futures Perspective in New York.
"For the oil market, this points to both softer physical demand for fuel and to some ongoing risk of further risk-off trade flow," he said.
© 2021 Thomson/Reuters. All rights reserved.