Oil gains as US stocks fall and Opec reaches agreement on dates

Opec+ will convene on July 1 and 2 in Vienna

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Oil gained 2 per cent on Thursday following Opec+ reaching consensus to meet in early July as markets were buoyed by the expectation of a production cut extension.

US crude inventory data, which showed a decline in stockpiles, also helped boost prices, with Brent gaining $2 to reach $63.4 per barrel at 1.25pm UAE time.

The upward push comes amid a general agreement among Opec’s large producers Saudi Arabia, the UAE and Iraq to extend current restrictions on output.

The pact has led to a collective drawdown of 1.2 million bpd of supply from the markets since January. Opec+, as the alliance correcting market supply is known, will meet in Vienna on July 1 and 2 ending month-long uncertainty.

UAE energy minister Suhail Al Mazrouei told reporters in Abu Dhabi on Wednesday that the grouping was likely to reach consensus on extending the curbs without difficulty.

"We’re looking at conformity levels, so I don’t think we’re changing that,” he said.

"We have seen a buildup in inventories … and that would require an extension. I don’t think it’s difficult to come to that conclusion from anyone watching the market, so I’m not expecting a very difficult process in approving the extension,” he added.

The US Energy Information Administration noted in its latest weekly report that commercial crude inventories decreased by 3.1 million barrels compared to the previous week.

The drawdown of stockpiles galvanised the markets at a time of largely bearish sentiment, despite increasing geopolitical tensions in the Middle East.

So far oil prices have yet to respond to geopolitical threats in the Middle East - through which a third of the world’s crude is transported - as low demand increased US supply and the standoff between Washington and Beijing outweighed other risks.

Prices have declined 18 per cent since April as the stalemate over the US-China trade talks weighed on trading. Markets, however, are confident the US and China will reach a trade deal now that a meeting is set next week at the G20 summit in Japan.

Mr Al Mazrouei said Opec and its allies would watch the trade talks closely.

"There is of course the trade tensions between the US and China and that has a key role to play in driving the demand and we hope that the upcoming talks between the two presidents during the G20, would resolve from the market," he said.