The prices of oil have continued its gradual rise with Brent futures trading above $39 per barrel for the first time since 9 March 2020. The U.S oil futures Western Texas Intermediate (WTI) traded above $36 per barrel while Western Canadian Select (WCS) is trading above $28 per barrel on Tuesday.
The rise in prices of oil is attributed to possible extension of OPEC+ production cuts. The Organization is mulling an extension of the current output cut which is due to expire on 30 June to another 1 or 3 months. The reason being that demand is still below the cartel’s anticipation.
Current prices of some selected oil blends as at 2:58pm GMT on Tuesday are as follows;
Brent – $39.06 per barrel, WTI – $35.99 per barrel, WCS – $28.89 per barrel while Nigeria Bonny Light closed at $35.89 per barrel on Monday.
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The oil cartel is hoping to discuss the extension in planned 4 June meeting. Saudi Arabia has given a positive node to the extension whereas Russia is yet to decide.
OPEC had in April, agreed a historic record deal to cut output by 9.7 million barrels per day in May and June, in its effort to salvage the depressing oil prices as coronavirus pandemic rained its terror on the oil market. The organization also agreed on a subsequent easing of the production restrictions.
On 11 May, Saudi Arabia announced an additional voluntary cut of 1 million per barrels per day which will see the country’s output reduced by about 4.8 million barrels per day.
Read further; Saudi Arabia to Voluntarily Cut Oil Production by Extra 1 Million Barrels per Day: Energy Ministry
Russia’s oil output dropped to 9.39 million barrels per day in May down from 11.35 million barrels per day in April according to Reuters. This 9.39 million includes 0.7 to 0.8 million gas condensate produced by Russia per day. Thus, the country’s oil output in May would be around 8.59 to 8.69 million barrels per day.
The entire member countries of OPEC+ recorded lowest oil output in May. However, Nigeria and Iraq are yet to meet their share of the production cut.
Demand for oil is also improving as several countries around the world began the easing of lockdowns and allowing the return of economic activities.
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As the world slowly emerge the from lockdowns, oil prices are set to rise due to strengthening demand. However, the rising prices presents the risk of shale drillers increasing outputs, which might lead to another supply glut if the supply outweighs the demand.
Written by;
Ifunanya Ikueze
