Oil prices rise ahead of OPEC meeting on output cuts

Oil prices rose on today to near three-month highs on expectations that major producers would agree to extend output cuts that have shored up prices, during a video conference likely to be held this week.

Benchmark Brent crude LCOc1 rose 2.5%, or 97 cents, to $39.29 a barrel as of this morning.

U.S. West Texas Intermediate (WTI) crude CLc1 also climbed 2.5%, or 88 cents, to $36.32 a barrel.

Brent has doubled in the past six weeks helped by supply cuts by the Organization of the Petroleum Exporting Countries and others including Russia, a grouping known as OPEC

But oil prices are still 40% down this year.

OPEC+ producers are considering extending their production cuts of 9.7 million barrels per day (bpd), equivalent to about 10% of global production, into July or August, at an online meeting expected to be held on June 4.

“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” said Citi’s head of commodities research Edward Morse.

Under the original OPEC+ plan, the cuts were due to run through May and June, scaling back to a reduction of 7.7 million bpd from July to December.

Saudi Arabia has been pushing to keep the deeper cuts in place for longer, sources said.

“An agreement to extend would buy the OPEC+ group some time to actually fully comply with the initial supply cut of 9.7 million bpd before decreasing output curtailment to 7.7 million bpd for the balance of the year,” BNP Paribas Global Head of Commodity Markets Strategy Harry Tchilinguirian told the Reuters Global Oil Forum.

Price gains have been capped by trade tension between China and the United States over Beijing’s security legislation in Hong Kong, as well as manufacturing data on Monday showing the world’s factories were still struggling.- Reuters