Oil prices yesterday extended gains for a straight fourth session, amid signs that producers are cutting output as promised just as demand picks up on the premises of more counties easing out of curbs imposed to fight the Coronavirius pandemic.
Brent crude rose by USD 0.85 or 2.4 per cent, to USD 35.66 per barrel at 0033GMT, after touching it’s highest since April 9.
US West Intermediate crude also gained USD 1.30 or 4.1 per cent to hit USD 33.12 a barrel, the highest it has climbed since March 16.
Report says, the June WTI contract expires on Tuesday, but there was little sign of a repeat of the historic plunge below zero witnessed a month ago on the eve of the May contract’s expiry amid signs that demand for crude and derived fuels is recovering from its nadir.
The market was also boosted by signs that output cuts agreed by the Organisation of Petroleum Exporting Countries (OPEC) and others including Russia, a group known as OPIC+ are being implemented on the ground.
OPEC+ has cut its oil exports sharply in the first half of May, companies that track the shipments, said, suggesting a strong start in complying with a new production agreement.
“Investors’ sentiment has improved as OPEC+ are apparently slashing output as they promised for the month, with more voluntary cuts in June,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“At the same time, there is growing optimism that the easing of global (Coronavirius) lockdowns will help boost economic activity and fuel demand,” she said, predicting the US crude benchmark could rise to USD 35 a barrel.
In further support for priced, US production is also falling, with crude output from seven major shale formations expected to fall by a record 197,000 barrels in June to 7.822 million barrels per day. That would be the lowest since August 2018, according to the US Energy Information Administration.