- Oil prices surged as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
- However, OPEC gave opaque targets for the increase, making it difficult to understand how much more it will pump.
- Iraq said the real increase would be around 770,000 bpd because several countries would struggle to reach full quotas.
Oil prices surged as much as 5 percent on Friday as OPEC agreed to a modest increase in output to compensate for losses in production at a time of rising global demand.
U.S. West Texas Intermediate (WTI) crude futures finished Friday's session up $3.04, or 4.6 percent, at $68.58 a barrel. The contract posted its biggest daily jump since November 2016.
Brent crude oil futures rose $2.50, or 3.4 percent, to $75.55 per barrel.
The Organization of the Petroleum Exporting Countries said in a statement that it would go back to 100 percent compliance with previously agreed output cuts but gave no concrete figures.
Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 percent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas.
The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting.
"There was a lot of anticipation in the market that there was going to be a lot of new oil coming to market, and that isn't going to happen, at least for now," said John Kilduff, a partner at Again Capital.
"We were teased with an increase of about 1.8 million barrels (per day) at one point, and we ended up getting about 600,000," Kilduff said.
OPEC's decision confused some in the market as the producers gave opaque targets for the increase, making it difficult to understand precisely how much more it will pump. The expectation that the increase will fall short of the 1 million bpd figure boosted the market.
"The effective increase in output can easily be absorbed by the market," Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
"You think about 1 million bpd coming back online ... its not going to happen instantaneously, its going to take time," said Brian LeRose, the senior technical analyst at ICAP.
Oil prices have been on a roller-coaster ride over the last few years, with the international marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 and then recovering to over $80 last month.
The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories.
The group started withholding supply in 2017 and this year, amid strong demand, the market tightened significantly, triggering calls by consumers for higher supply.
Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of U.S. sanctions, have all increased market worries of a supply shortage.
Another big uncertainty for oil is the escalating dispute between the United States and its trading partners, which could hit U.S. crude oil exports to China.
If a 25 percent duty on U.S. crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere. Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.
That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions.
A large decline in inventories at the U.S. storage hub of Cushing, Oklahoma also helped trigger the rally, traders said.
Data on Friday showed U.S. energy companies this week cut one oil rig, the first reduction in 12 weeks, after drillers started to slow down the rate of additions this month as pipeline constraints put a damper on future production.
— CNBC's Tom DiChristopher contributed this report.