Oil rose near $34 a barrel following Russia’s prediction that the market may balance as early as next month as global producers take historic amounts of crude out of the market.
Russia, a key member of the OPEC+ alliance that has pledged record output cuts, expects the market to balance in June or July. Energy Minister Alexander Novak said global output curbs have so far exceeded those agreed by the coalition. Futures in New York rose 2.4 per cent from Friday’s close after there was no settlement Monday due to a holiday.
Oil has surged more than 80 per cent this month as demand has picked up following the easing of lockdown restrictions in some countries, while output cuts have started to chip away at the oversupply. The International Energy Agency sees consumption eventually rebounding past pre-virus levels, even as some argue that the coronavirus outbreak will fundamentally shift patterns of consumption.
“Global supply is still heading lower while demand is rising,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “This all lays the ground for higher prices down the road.”
- West Texas Intermediate crude for July delivery rose 82 cents from Friday’s close to $34.07 a barrel as of 7:58 a.m. New York time
- Brent for July settlement added 57 cents, or 1.6 per cent, to $36.10 a barrel
Nigeria, which has been stuck with millions of barrels of unsold crude in recent weeks, lifted the selling price for its supplies in June from record lows. Though smaller than in previous months, the discounts remain at unprecedented levels, a reminder of the pockets of glut in the market.
Around the world, producers have slashed global production by 14 million to 15 million barrels a day so far, Russia’s Novak said on Monday. The nation sees the current global surplus at 7 million to 12 million barrels a day, RIA Novosti reported Monday.
Though output has been cut and demand is recovering, there are ongoing signs of the damage the virus has wrought on the industry. Both refineries in the Philippines have now been shut as a result of weak fuel demand, according to their operators.
© 2020 Bloomberg L.P.