Oil climbs after OPEC+ agree record output cut – World

Oil prices rose on Monday after major producers finally agreed to their biggest cut in production, but gains were limited amid concerns that it will not be enough to prevent oversupply with the coronavirus pandemic hitting the demand.

After four days of disputes, the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, a group known as OPEC +, agreed on Sunday to cut production by 9.7 million barrels per day (bpd) in May and June to support oil. prices, which represent around 10 percent of world supply.

Brent LCOc1 crude futures rose 16 cents, or 0.5pc, to $ 31.64 a barrel at 0709 GMT after opening at a session high of $ 33.99. West Texas Intermediate (WTI) CLc1 crude futures rose 37 cents, or 1.6pc, to $ 23.13 a barrel, after peaking at $ 24.74.

"What this agreement does is allow the global oil industry and the national economies and other industries that depend on it to avoid a very deep crisis," said IHS Markit Vice President Daniel Yergin.

"This restricts the accumulation of inventories, which will reduce the pressure on prices when normal returns, as long as this is the case."

The leaders of the world's three main oil producers, Russian President Vladimir Putin, US President Donald Trump and King Salman of Saudi Arabia, supported the OPEC + agreement to cut world oil production, said on Sunday on Sunday. Kremlin.

Trump praised the deal and said it would save jobs in the U.S. energy industry.

Saudi Arabia, Kuwait and the United Arab Emirates volunteered to make even deeper cuts than agreed, effectively reducing OPEC + supply by 12.5 million bpd from current supply levels, the energy minister said. Saudi.

However, analysts question producers' likely compliance with the cuts, adding that actual reductions may not be as high as the volume promised by producers.

Furthermore, demand concerns limited gains in oil prices. Global fuel consumption has decreased by approximately 30pc, due to the COVID-19 pandemic caused by the new coronavirus that has killed more than 100,000 people worldwide and kept companies and governments locked up.

"After an initial positive reaction in oil prices, we expect OPEC + 's decision, at best, to establish a floor below the market," said Harry Tchilinguirian of BNP Paribas in a note, adding that the Oil price gains could also be limited by producer hedges.

"We do not expect a sustained recovery in the price of oil until the demand accumulated in the third quarter is released," he said.

The deal had been delayed since Thursday after Mexico opposed the production cuts it was asked to make. The OPEC + group met on Sunday to draft the deal, resulting in a production cut four times as deep as the previous record cut in 2008.

OPEC + also said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut 5% more.
or 5 million bpd.

Canada and Norway expressed their readiness to cut back. The United States, where antitrust legislation makes it difficult to act in concert with groups like OPEC, has said its output would already drop to 2 million bpd this year without planned cuts due to low prices.

"Anyway, we will see a significant drop in production from producers who cannot make money producing," said Phil Flynn, analyst at Price Futures group.

However, optimism about the long-term impact of the OPEC + cuts has raised prices for future months, widening the contact of Brent, the market structure when prices with a later date are higher than immediate supplies. .

"For the (third quarter), these cuts should make a difference and result in induced inventory draws for most of the rest of 2020," Citi analysts said as the bank raised its Brent price forecasts for the third and fourth. quarter at $ 35 and $ 45 per year. barrel, respectively.

Morgan Stanley also raised its forecasts by $ 5 for the second half of the year to $ 30 to $ 35 per barrel.