Oil prices advance on increased optimism of output cut, Bonny Light now $34.09

Oil appreciated Tuesday, spurred in part by improving investors’ sentiment that oil-producing economies will fulfil their pledge to slash output and also by signs of growing demand for fuel as curbs put in place to check the coronavirus lockdowns are gradually lifted.

US West Texas Intermediate crude futures jumped 3.47% or $1.12 to $34.37 per barrel as of 07:52 West African Time after touching a peak of $34.54 intra-day.

Brent crude futures climbed up by roughly 1.7% or 61 cents to $36.14 a barrel, having increased by 1.1% at the Monday session.

Meanwhile, Nigeria’s Bonny Light had on Monday appreciated by 2.5% or $0.84 to $34.09.

Market operations were stimulated by news that Russia had almost fully achieved its cut target of 8.5 million barrels per day (bpd) for May and June in fidelity to the supply reduction agreement between the Organisation of Petroleum Exporting Countries and other producers, known by the tag, “OPEC+.”

Senior commodity strategist at Australia and New Zealand Banking Group, Daniel Hynes, said “there’s definitely a feeling those cuts have come through as well as you could expect.”

Read also: Oil prices slide as U.S.-China conflict festers, Bonny Light down by $1.45

OPEC+ nations are planning to meet in June over strategies that will help sustain production cuts and boost prices, which currently are down by 45% year to date.

Oil majors had in April consented to 10 million bpd output cut from May through June.

Russia energy’s ministry quoted minister Alexander Novak on Monday as saying improvement in fuel demand should help minimise global oil market saturation by between 7-12 million by June or July.

“With economies restarting, the focus definitely is on the improvement in the fundamentals, rather than what seemed like a complete collapse in demand only a few weeks ago,” Hynes said.

Data gleaned by Reuters from Baker Hughes, an energy services firm, indicated that the U.S.’ rig count reached a historic low of 318 in one week to 22^nd May, demonstrating the possibility of a lower future output.

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