Oil prices rise before Opec+ meeting about extending output cuts

  • Oil prices rise before Opec+ meeting about extending output cuts

Oil prices rise before Opec+ meeting about extending output cuts

Saudi Arabia and other oil-producing countries may be forced to continue or expand production cuts, but these will likely be ineffective at propping up oil prices if demand continues to fall.

Benchmark Brent crude rose 2.3 per cent, or 88 cents, to $39.20 a barrel as of 0840 GMT.

West Texas Intermediate for July delivery rose 0.2% to $35.52 a barrel on the New York Mercantile Exchange as of 10:08 a.m.in Singapore.

Brent has doubled in the past six weeks helped by supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and others including Russian Federation, a grouping known as OPEC+. Although prices recovered slightly after this year's crash due to the COVID-19 pandemic, they were still well below recent highs.

Riyadh is said to be pushing for bigger production cuts to support oil prices, but other nations are keen to increase output to bring in more revenue.

According to the original agreement reached earlier this year, OPEC+ was to cut 9.7 million bpd in combined production for two months-May and June-and then ease this to 7.7 million bpd, to stay in effect until the end of the year.

So far Saudi Arabia has been complying with promised production cuts and curtailing supply further to support the stability of worldwide oil markets.

A drop in crude stockpiles at Cushing, Oklahoma, which fell to 54.3 million barrels in the week to May 29, also buoyed prices, traders said, citing a Genscape report on Monday.

"Most likely, OPEC+ could extend current cuts until September 1, with a meeting set before then to decide on next steps", said Citi's head of commodities research Edward Morse.

"There are legitimate concerns that the bullish market signals that built up steam over the course of last month might be based on misleading and temporary factors", Morse said.

Price gains have been capped by trade tension between China and the United States over Beijing's security legislation in Hong Kong as well as manufacturing data on Monday showing the world's factories were still struggling.