(London) REUTERS: Oil rose yesterday, topping US $ 40 a barrel for the first time since March, supported by lower U.S. inventories, expectations OPEC+ will keep oil output cuts in place and signs of demand recovery from the coronavirus crisis.
Suggesting a supply glut is on the way out, the American Petroleum Institute said on Tuesday U.S. crude inventories fell by 483,000 barrels. The government’s official supply report is due out later yesterday.
Brent crude futures for August LCOc1 were up 59 cents or 1.5 percent, at US $ 40.16 by 0840 GMT, reaching a high of US $ 40.53, the highest since March 6. U.S. West Texas Intermediate (WTI) crude for July CLc1 gained 80 cents, or 2.2 percent, to US $ 37.61.
“A consensus is emerging that the producer group will prolong current cuts,” said Stephen Brennock of oil broker PVM, referring to OPEC and its allies.
Both benchmarks have surged in recent weeks. Brent has more than doubled after hitting a 21-year low below US $ 16 in April, when U.S. crude went negative. A recovery in China and the easing of government lockdowns elsewhere is supporting prices.
The Organisation of the Petroleum Exporting Countries and other producers including Russia,
known as OPEC+, are cutting output by 9.7 million barrels per day (bpd), about 10 percent of pre-coronavirus global output, in May and June to support prices.
OPEC+, encouraged by signs of recovery in the market, is considering extending the 9.7 million bpd cut beyond June. But there has been no agreement yet on bringing forward a ministerial meeting to Thursday from later in June as currently scheduled.
“When you have Brent approaching US $ 40, it is a good sign,” said an OPEC delegate. “We are on the right track.”