Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China's crude imports hit a record high in May.

Brent crude was up 50 US cents, or 1.2%, at $42.80 per barrel, by 8.40am GMT, while US West Texas Intermediate (WTI) crude rose 31c, or 0.8%, to $39.86 a barrel.

Both hit their highest since March 6 earlier in the session, at $43.41 and $40.44, respectively.

Brent has nearly doubled since oil cartel Opec+ agreed in April to cut supply by 9.7-million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis.

On Saturday, Opec+ agreed to extend the deal to withdraw almost 10% of global supplies from the market by a third month to end-July. Following the extension, top exporter Saudi Arabia hiked its monthly crude prices for July.

Low prices have drawn Chinese buyers to boost imports. Purchases by the world's largest crude importer rose to a record high of 11.3-million bpd in May.

But consultancy JBC Energy warned higher prices could discourage buying and undercut a fragile demand recovery.

“We cannot shake the feeling that, price-wise, this market has got a bit ahead of itself and will need a good confluence of bullish surprises to continue in order to maintain current pricing levels,” JBC said in note.

Even as oil prices recovered, they are still well below the costs of most US shale producers, leading to shutdowns, layoffs and cost-cutting in the world's largest producer.

The number of operating US oil and natural gas rigs fell to a record low for a fifth week in a row in the week to June 5, according to data from Baker Hughes.

Reuters 

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.