Picture: 123RF/PAVEL IGNATOV
Picture: 123RF/PAVEL IGNATOV

London — Oil rose to above $42 a barrel on Friday, adding to gains in the previous session, after oil cartel Opec producers and allies promised to meet supply cuts and signs of demand, hit by the coronavirus crisis, recovering.

On Thursday, Iraq and Kazakhstan, during a meeting of a panel of Opec and its allies, Opec+, pledged to comply better with oil cuts, sources said. This means the curbs by Opec+ could deepen in July.

Brent crude rose $1.09, or 2.6%, to $42.60 by 8.29am GMT, the highest since June 8. US West Texas Intermediate (WTI) crude climbed $1.07, or 2.8%, to $39.91.

“Iraq said that it would meet its Opec+ production cuts and would make good the targets it had previously missed in the coming months,” said Jeffrey Halley, analyst at brokerage Oanda. “Signs that European consumption is rebounding also assisted supporting prices.”

Both contracts rose about 2% on Thursday and are heading for weekly gains of about 10%.

Brent has more than doubled since hitting a 21-year low in April, helped by record Opec+ supply cuts of 9.7-million barrels per day (bpd), or 10% of world demand, and an easing of government lockdowns imposed to control Covid-19.

Fuel demand across Europe is staging a gradual recovery after the height of the lockdowns in April but remains well below normal, data from several countries shows.

In a further sign of market recovery, Brent moved into backwardation on Thursday, meaning oil for immediate delivery costs more than supply in the future, for the first time since March. A premium for oil for immediate delivery usually indicates tightening supply and encourages storage to be drawn down.

US crude stocks hit another record this week, but fuel inventories fell.

Reuters