Oil prices strengthened on Monday, two days after world major producers consented to sustain a deal on historic production cuts to the end of July just as China’s oil imports nudged their record high in May.
Brent crude notched up 63 cents or 1.49% to reach $42.93 a barrel as of 08:49 West African Time while its U.S. counterpart benchmark, West Texas Intermediate, enlarged by 52 cents or 1.31%, trading at $40.07 per barrel.
The two attained their three-month high earlier in Monday session as they touched $43.41 and $40.44 respectively.
Bonny Light, Nigeria’s chief crude grade, had gained $2.90 or 7.58% at the last session to end trade at $41.17 per barrel.
Brent has almost seen a 100% appreciation since April when the Organisation of the Petroleum Exporting Countries (OPEC), Russia and allies – collectively known as OPEC+ – resolved to slash output by 9.7 million barrels per day (bpd) May through June to buoy prices crashed by the coronavirus pandemic.
OPEC+ agreed to prolong the deal on Saturday to remove roughly one tenth of global supplies from the market till the end of July.
World’s biggest oil exporter, Saudi Arabia, upped its monthly crude prices for July in the wake of the extension.
Howie Lee of Singapore bank OCBC told Reuters that the current agreement had fallen short of market hopes for a three-month extension of supply cuts.
The two benchmarks, according to him, will need bigger bullish factors to ramp up prices to the point they were before 6th March, when they plunged after OPEC and Russia originally failed to agree to output cuts.
“It’s a big gap there. You need a strong conviction to go from $43 to pre-crash levels,” Lee said, referring to Brent being above $50 before the March price slump.
Low prices have wooed buyers from China to boost imports. In May, purchases by the world’s largest importer of crude rocketed to a historic high of 11.3 million bpd.
The determination of OPEC+ to sustain cuts till July is, nevertheless, anticipated to trigger a supply deficit come October, aiding prices in the longer run, Lee added.
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