Oil rises as supply cuts kick in and fuel demand picks up
Both Brent and WTI are up, with Opec+ meeting in June to discuss maintaining output cuts into the second-half of the year
London — Oil prices rose on Tuesday, supported by growing confidence that producers are following through on commitments to cut crude supplies while fuel demand picks up with more cars back on the road as coronavirus lockdowns ease.
Brent crude futures were up nearly 1.4%, or 50c to $36.03 a barrel as of 8.40am GMT.
US West Texas Intermediate (WTI) crude futures was up 2.6%, or 86c, at $34.11 a barrel. There was no WTI settlement on Monday because of the US Memorial Day holiday.
The market was buoyed by comments from Russia that its oil output had dropped almost to its target of 8.5-million barrels per day (bpd) for May and June under the supply-cut deal agreed by oil cartel Opec and other major producers, including Russia (Opec+).
Opec+ countries are set to meet again in early June to discuss maintaining their supply cuts to shore up prices, which are still down about 45% since the start of the year.
The world’s major producers, including Saudi Arabia and Russia, agreed in April to cut their collective output by nearly 10-million bpd for May and June.
On Monday, Russia’s energy ministry quoted minister Alexander Novak as saying a rise in fuel demand should help cut a global surplus of about 7-million to 12-million bpd by June or July.
“Russia is clearly committed to continued cuts in the second half of 2020, so the upcoming Opec+ meeting on June 9 is unlikely to be a bearish surprise like the one that fell apart on March 6,” SEB chief commodities strategist Bjarne Schieldrop said.
Data from energy services firm Baker Hughes, meanwhile, showed the US rig count hit a record low of 318 in the week to May 22, also indicating lower output in the future.