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Oil prices rise on hopes of output cut, Bonny Light up by 31 cents

Oil prices rise as OPEC, allies agree deal to cut output by 10m barrels/day

Oil prices posted modest gains on Tuesday, reversing earlier losses as optimism regarding additional cuts in crude output dampened the fears that a resurgence of fresh coronavirus cases around the world might hurt fuel demand.

Brent crude gained 60 cents or 1.51%, at $40.32 per barrel at 10:42 West Africa Time, having appreciated by 2.6% on Monday.

West Texas Intermediate, its U.S counterpart benchmark, was up by 45 cents or 1.21% at $37.57 a barrel, after closing 2.4% higher at session before.

Nigeria’s Bonny Light advanced by 31 cents or 0.82% on Monday to $38.18 per barrel. However, Qua Iboe, another major oil grade fell by 33 cents or 0.87% to close at $37.45.

Coronavirus cases crossed the 8 million mark worldwide on Monday with infections surging in Latin America just as the U.S. and China grapple with new outbreaks. But a number of observers said they did not anticipate any return to the stringent lockdowns experience at the beginning of the year.

Read also: Oil prices extend fall on fears of demand recovery, Bonny Light now $39.77

“While the run of COVID-19 headlines emphasise that a demand recovery is likely to be a slow process, it seems unlikely that we see a return to the lockdown measures of 1H,” Stephen Innes, Chief Global Markets Strategist at AxiCorp, said in a note.

Hopes of bigger cuts in oil output by major producers also helped avert sharper price slumps, analysts said.

Prices strengthened on Monday after the United Arab Emirates’ energy minister expressed confidence that OPEC+ producers comprising members of the Organisation of the petroleum Exporting Countries (OPEC) and allies led by Russia – that are yet to fully comply with previously agreed cuts would up their game.

“Renewed optimism that OPEC+ production cuts could remain in place if we see second-wave (coronavirus) concerns intensify have oil prices refusing to enter freefall,” said Edward Moya, Senior Market Analyst at OANDA.

OPEC+ agreed earlier this month to sustain production cuts of 9.7 million barrels per day through July. It also called on members that have not been complying to make up their commitments with additional cuts later.

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