Oil Prices Rise on Indication of Further Near-Term Cuts by OPEC+
Oil prices rose again mid week on hopes that additional supply curbs announced by leading OPEC producer Saudi Arabia for the next month would prompt other members of the cartel and other allies to accelerate production cuts.
The near-month Brent crude futures contract was trading at over US$30 per barrel on Thursday, while U.S. benchmark West Texas Intermediate (WTI) crude futures stood at around US$26.50 per barrel.
At the start of the week, the world’s top oil exporter and OPEC leader Saudi Arabia stated that it would add to existing cuts by reducing output by another 1.0 million barrels per day (b/d) in June, thereby slashing total production to 7.5 million b/d, nearly 40% less than it was producing in April. Gulf allies U.A.E and Kuwait also restated their commitment to slashing an extra 180,000 b/d of production in total.
Oil prices garnered further support from the announcement that Kazakhstan had ordered producers from its large and mid-sized oil fields to cut output by at least 22% in May and June. Furthermore, reports of an estimated 15% fall in output from Western Siberia, Russia’s top oil producing region, relative production levels at the beginning of this year also bolstered prices.
Data from the American Petroleum Institute (API) this week also showed the U.S. crude storage rose by 7.6 million barrels to 526.2 million barrels. However, gasoline stocks fell by 1.9 million barrels, a draw down that was below the 2.2 million barrels that analysts had predicted.
Despite the upward move in oil prices, fears of a second wave of Covid-19 infections globally following the relaxing of lockdowns in several countries continued to weigh on market sentiment and capped potential gains.