Brent oil down but WTI up, as investors assess OPEC’s move

U.S. and Brent oil prices were moving in opposite directions on Monday, amid some uncertainty in the wake of an agreement by the Organization of the Petroleum Exporting Countries to ramp up production that was backed by non-member Russia.

August West Texas Intermediate crude on the New York Mercantile Exchange  rose 31 cents, or 0.5%, to $68.90 a barrel. But Brent crude  fell 85 cents, or 1.1%, to $74.47 a barrel.

Prices for both contracts rallied on Friday, after OPEC agreed to increase production by 1 million barrels a day, a deal that was supported by major producer Russia on Saturday.

OPEC and key non-member producers have been holding back oil output by around 1.8 million barrels a day since the start of 2017 to curb a global supply glut that has been pressing on prices. But bigger cuts from Saudi Arabia have meant compliance has exceeded the planned quotas.

Most of the additional output to come under agreement will be produced in Saudi Arabia and Russia, and that flow will likely go primarily to consumers of Brent crude. The production caps helped fuel a sizable price premium between Brent and WTI, said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.

“Price movements over the later hours on Friday and early Monday, however, highlight the confusion over what to expect as a result of the OPEC/non-OPEC maneuver, as well as the emergence of other sizeable market-moving information,” said JBC Energy Research Centre, in a note to clients, adding that Brent was also being hit by fresh U.S. threats to ratchet up trade tensions with China.

Given a stand-off between the potential for a gradual supply increase of some 1 million barrels per day and bigger downside risk from Venezuela, Libya and Iran over the coming months, JBC said it’s likely crude balances will remain tight over the second half of the year. “Absent some sort of sizeable demand issue, this should continue to support Brent prices above $70 per barrel,” the analysts said.

Meanwhile, data out Friday showed the number of active U.S. rigs drilling for oil fell by 1 to 862 this week. That slight decline followed four straight weeks of increases. The total U.S. rig count dropped by 7 to 1,052.

In other energy products, July gasoline  fell 0.9% to $2.052 a gallon, while July heating oil  slipped 0.6% to $2.113 a gallon.

July natural gas  gave up 1.3% to $2.908 per million British thermal units.

— Biman Mukherji contributed to this article