London, May 22 (Reuters) – Oil prices fell 1% on Thursday after a report that OPEC+ is discussing a production increase for July, stoking concerns that global supply could exceed demand growth.

Brent futures fell by approximately Ksh83, or 1%, to Ksh8,355 per barrel by 0800 GMT. U.S. West Texas Intermediate crude dropped about Ksh77, or 1%, to Ksh7,927.

The Organisation of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, are discussing whether to make another large output increase at their meeting on June 1, Bloomberg News reported.

In a note on Wednesday, RBC Capital analyst Helima Croft said that a 411,000 bpd increase from July is the “most likely outcome” from the meeting, primarily from Saudi Arabia.

“A key question will be whether the voluntary cut will be fully drawn down before the leaves turn brown in many parts of the world, in line with the original taper schedule,” she said.

Prices were already lower in the session after Energy Information Administration data released on Wednesday showed U.S. crude and fuel inventories showed surprise stock builds last week as crude imports hit a six-week high and gasoline and distillate demand slipped.

Crude inventories rose by 1.3 million barrels to 443.2 million barrels in the week ended May 16, the EIA said. Analysts in a Reuters poll had expected a drawdown of 1.3 million barrels.

Ripple Effect

The EIA’s surprise stock builds will exert downward pressure on prices, particularly on WTI, said Emril Jamil at LSEG Oil Research, adding that this could further encourage more U.S. exports to Europe and Asia.

While OPEC+ deliberates, a rising yield on 10-year U.S. Treasury bonds suggests that the producer group could be increasing oil supply into a market with lower demand.

Reporting by Anna Hirtenstein. Additional reporting by Yuka Obayashi, Michele Pek and Florence Tan. Editing by David Goodman