DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange rallied in afternoon trade Tuesday, with the U.S. crude benchmark ending at its highest settlement on the spot continuous chart in over two and a half years after the Organization of the Petroleum Exporting Countries and Russia-led allies maintained their agreement to gradually increase production through July.

Having restrained 7.2 million barrels per day (bpd) of crude production in January, OPEC+ agreed on April 1 to gradually add barrels back to the market, increasing output by 350,000 bpd this month and another 441,000 bpd in July following a 500,000 bpd production hike in May. Saudi Arabia is also gradually bringing back 1 million bpd in an additional unilateral cut it made earlier this year.

Saudi Energy Minister Prince Abdulaziz bin Salman said there were still "clouds on the horizon" regarding the recovery and demand for energy, but recent market developments proved the decision to gradually increase production, originally made in April and reconfirmed Tuesday, was "the right one."

Saudi Arabia and Russia among other OPEC+ members faced increasing pressure in recent months that renewed COVID-19 outbreaks in countries like India, a major oil consumer, will hurt global demand and weigh on prices. OPEC+ made drastic cuts to support prices during the worst of the pandemic slowdown in 2020 and must now judge how much additional oil the market needs as producers slowly add more production.

Analysts also speculated how OPEC+ would account for increased crude exports from Iran should U.S. sanctions be waived by Washington as the Biden administration seeks to restore the Joint Comprehensive Plan of Action the Trump administration withdrew from in 2018. Market analysts expect some kind of nuclear deal framework would be reached before Iran's June 18 presidential election. Saudi Oil Minister Bin Salman said the prospect of more Iranian oil coming to market was not discussed at the brief meeting, which he said lasted less than half an hour.

On the session, July West Texas Intermediate futures surged to a 31-month spot high settle at $67.72 barrel (bbl) and ICE August Brent crude futures settled up $0.93 at $70.25 bbl. July ULSD futures advanced 3.32 cents at $2.0715 gallon, with July RBOB futures gaining 3.35 cents to $2.1704 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com