Oil prices rise ahead of Opec+ meeting

Last week, the IEA revised its outlook for global oil demand down by 140,000 bpd

US crude, which plunged below zero, trading in the single digits in April, ahead of the expiry of the benchmark’s May contract, over saturated storage, has since made a decent recovery. AFP

Oil prices registered gains ahead of a meeting of Opec+ producers this week, where key exporters will assess compliance with its current output deal and evaluate supply restrictions.

International benchmark Brent was up 0.33 per cent, trading at $44.95 per barrel at 12.08pm UAE time, while key US gauge West Texas Intermediate was up 0.48 per cent at $42.21 per barrel.

Opec+, led by Saudi Arabia and Russia, will convene their joint ministerial monitoring committee meeting on Wednesday. The group undertook a record 9.7 million barrels per day of cuts from May until July and later tapered it to 7.7m bpd from August 1 onwards. Opec+ will keep tapered restrictions in place until April 2022.

"WTI crude is still at the make-or-break level near $43 per barrel, its 200-day moving average. Bulls remain optimistic that, though revised to the downside, the recovery in global oil demand would continue giving support [to] the market,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

But the analyst cautioned that the rising number of Covid-19 cases and uncertainties over the global economic recovery may limit WTI’s advance to the $40 per barrel mark or below.

Global cases of coronavirus numbered more than 21.8 million as of Monday, according to Worldometer, which tracks the pandemic. Around 773,122 people have succumbed to the virus, with more than a fifth of the fatalities occurring in the US.

Last week, the International Energy Agency revised its outlook for global oil demand down by 140,000 bpd - the first cut in several months - amid a rise in global Covid-19 cases and continued weakness in the aviation sector.

The Paris-based agency expects demand to average 91.9 million bpd in 2020, down 8.1m bpd year-on-year.

The IEA’s estimate follows Opec’s downward revision of oil demand growth in 2020 by 100,000 bpd in its latest oil market report. The exporters’ group expects oil demand to average 90.6m bpd in 2020.