Investing.com - Oil prices will likely see a volatile start to the week after U.S. President Donald Trump surprised traders by announcing an impromptu agreement with Saudi Arabia to add more supply to increasingly tight oil markets.
In an early morning tweet on Saturday, Trump said Saudi Arabia's King Salman had agreed to his request to increase crude production “maybe up to" 2 million barrels to help offset a decline in supply from Iran and Venezuela.
However, he did not specify if the figure was barrels per day (bpd), the normal measure for oil production.
Saudi state media reported that in a phone call Saturday, the Saudi king and Trump emphasized the need to preserve oil market stability and efforts of oil-producing countries to compensate for any potential shortage.
Saudi Arabia is the world's top oil exporter and the Organization of Petroleum Exporting Country's (OPEC) biggest producer.
A week ago, OPEC and its allies, including Russia, agreed to boost supplies, easing curbs in place since the start of 2017. They did state how much extra supply they would add.
In briefings since then, OPEC officials have signaled the extra volume is likely to be in the range of 700,000 to 1 million bpd. A request by Trump for 2 million bpd more would be at least double market expectations.
Iran urged fellow OPEC members to "refrain from any unilateral measures", warning that would undermine the unity of OPEC, in a response to Trump's tweet.
The Trump administration is pushing countries to cut all imports of Iranian oil from November when the U.S. reimposes sanctions against Tehran, after Trump withdrew from the 2015 nuclear deal agreed between Iran and six major powers, calling it a "defective" agreement.
Oil prices settled close to three-and-a-half-year highs on Friday, supported by ongoing supply concerns.
U.S. benchmark oil, August West Texas Intermediate crude rose 70 cents, or around 1%, to settle at $74.15 a barrel on the New York Mercantile Exchange. It saw its highest finish since November 2014 and gained about 8% for the week.
Elsewhere, September Brent crude, the global benchmark, jumped $1.62, or 2.1%, to end at $79.23 a barrel on the ICE Futures Europe exchange. They enjoyed a gain of roughly 5.2% for the week.
Oil traders will also continue to weigh U.S. production levels in the week ahead.
The number of active U.S. rigs drilling for oil fell by four to 858 last week, Baker Hughes said in its closely followed report on Friday. That was the second-straight weekly drop in rig counts, raising investor hopes that the rampant pace of domestic output could be slowing at a time of rising global demand.
Domestic oil output - driven by shale extraction - is currently at an all-time high of 10.9 million bpd. Only Russia currently produces more, at around 11 million bpd.
Fresh weekly data on U.S. commercial crude inventories on Tuesday and Thursday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise will capture the market's attention.
Ahead of the coming week, Investing.com has compiled a list of the main events likely to affect the oil market.
Tuesday, July 3
The American Petroleum Institute is to publish its weekly report on U.S. oil supplies.
Wednesday, July 4
Markets in the U.S. will remain closed for Independence Day.
Thursday, July 5
The U.S. Energy Information Administration will release its weekly report on oil stockpiles. The report comes out one day later than usual due to Wednesday's holiday.
Friday, July 6
Baker Hughes will release weekly data on the U.S. oil rig count.