Crude-oil futures on Tuesday headed higher, at least partly supported by reports that major producers may agree to extend output cuts that terminate at the end of June to further steady oil prices.
Reuters has reported that the Organization of the Petroleum Exporting Countries and notably major producer Russia, part of a group known as OPEC+, are considering extending cuts of some 9.7 million barrels per day to July or August, during a meeting now set to take place June 4 — bringing forward a meeting that had been scheduled for June 9-10.
There is evidence that those production cuts have been effective, with Russian output falling to 9.39 million barrels a day last month, near the OPEC+ goal, Reuters reported, citing a report from Interfax news agency. Russia’s output was down from 11.35 million barrels per day in April, the news organization reported, citing sources familiar with the matter.
“An extension of the current cut levels will definitely be a further boost for the market. Not only will the market rebalance, but stock builds of oil will also feel some relief,” wrote Bjornar Tonhaugen, Rystad Energy’s head of oil markets, in a note.
“Prices rise on this prospect and are set for higher levels if the cuts are indeed extended,” he said. “OPEC+ cuts are clearly working with solid help from recovering crude oil demand, especially in Asia,” he said.
The crude market also has been bolstered by hope that business reopenings across the world from the COVID-19 pandemic could help to drive demand for oil and other crude byproducts.
Investors, however, have focused on strained relations between the U.S. and China with Bloomberg News reporting on Monday that Beijing has halted some imports of U.S. soybeans, potentially adding to Sino-American friction, which could add pressure on crude prices if it results in an erosion of the hard-won, phase-one trade agreement.
West Texas Intermediate crude for July delivery gained 93 cents, or 2.6%, at $36.37 a barrel on the New York Mercantile Exchange, after shedding less than 0.1% on Monday.
Global benchmark Brent saw its August contract climb 96 cents, or 2.5%, at $39.27 a barrel on the ICE Futures Europe platform, after the contract rose 1.3% in the previous session.