Oil prices advanced further on Friday as traders expect signals from a conference that could hold this weekend among key oil producing countries to consider the prospect of extending historic output cuts.
Brent crude futures gained 65 cents or 1.63% to reach $40.64 a barrel as of 09:49 West African Time just as its American counterpart benchmark, West Texas Intermediate (WTI) crude futures rose 38 cents or 1.02% to $37.79.
Bonny Light, Nigeria’s chief oil grade, notched up 3 cents or 0.08% at Thursday’s session to close at $38.27 per barrel.
Brent, the benchmark for Nigeria’s grades, has added up approximately 14% so far this week while the WTI is higher by almost 6%. Both benchmarks are on course for their sixth week of gain.
The reasonable price appreciation had been achieved, thanks to production cuts and intimations of expanding fuel demand as nations start to relax coronavirus lockdowns.
On Saturday, the Organisation of the Petroleum Exporting Countries (OPEC) and an alliance of other oil producers led by Russia, a grouping known as OPEC+, are to meet on Saturday to deliberate on extending output cuts, Algeria’s Ennahar TV channel reported on Friday, citing an OPEC insider.
According to Reuters, three OPEC+ sources mentioned earlier that a ministerial videoconference might be held this week in a situation where Iraq and others consent to up their commitment to current production cuts.
Edward Moya, Senior Market Analyst at OANDA Corporation, said oil prices are approaching their sixth weekly advance but gains had eased as traders are taking the possibility of Iraq’s full compliance with output cuts “with a grain of salt”.
“There still could be a chance that they manage to stretch the cut deal to three months, but energy traders would be extremely sceptical that compliance would remain high beyond July”.
Saudi Arabia and Russia intend to take the current production cuts of 9.7 million barrels per day (bpd) into July.
Earlier timed to hold on 4th June, the OPEC+ meeting was postponed due to insinuations regarding poor compliance with resolutions to reduce supply by a number of oil producers.
“The growing fear is that not only will a deal to extend the deep cuts not be reached, but (some) producers may even relax their current over-compliance. This would ultimately see output rise in coming weeks,” said ANZ Research in a note.
Failure to sustain the current supply cuts by OPEC+ could cause the reduction to fall to 7.7 million bpd from July to December according to original plan.
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