Oil rises as markets await Opec+ meeting on extended output cuts

Singapore/Melbourne — Oil prices rose on Tuesday, with traders waiting to see whether producers agree at a virtual meeting expected later this week to extend their huge output cuts to shore up prices.

Brent crude futures rose 0.91%, or 35c, to $38.67 a barrel up to 4.27am GMT.

West Texas Intermediate (WTI) crude futures rose 0.56%, or 20c, to $35.64 a barrel.

Brent has doubled over the past six weeks, thanks to supply cuts by the Organisation of the Petroleum Exporting Countries (Opec) and allies, including Russia, a grouping dubbed Opec+. Brent and WTI prices, however, are still down about 40% for the year so far.

Opec+ producers are considering extending their output cut of 9.7-million barrels a day, about 10% of global production, into July or August, at an online meeting likely to be held on June 4.

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

Under the Opec+ plan agreed in April, the record supply cut was to be for May and June, scaling back to a cut of 7.7-million barrels a day from July to December. Saudi Arabia has been leading talks to push for extending the heftier cuts, sources told Reuters.

“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” said analysts at Dutch bank ING.

An extension could push oil prices to $40, but there would have to be follow-through on that commitment to sustain higher prices, said Commonwealth Bank’s Dhar.

A drop in crude stockpiles at Cushing, Oklahoma, which fell to 54.3-million barrels in the week to May 29, also buoyed prices, traders said, citing a Genscape report on Monday.

A preliminary Reuters poll, however, showed that overall US crude oil stocks were likely to have increased last week.

Trade tension between China and the US over Beijing’s security clampdown in Hong Kong, as well as manufacturing data on Monday showing Asian and European factories struggling, has kept a lid on gains.