Oil Prices Rise on OPEC+ Cuts, record China Imports

• 06.08.2020, 14:05
•  World

Reuters

Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China’s crude imports hit an all-time high in May, Reuters reports.

Brent crude LCOc1 was up 51 cents, or 1.2%, at $42.81 per barrel, by 0628 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 32 cents, or 0.8%, to $39.87 a barrel.

Both hit their highest since March 6 earlier in the session, at $43.41 and $40.44, respectively.

Brent has nearly doubled since the Organization of the Petroleum Exporting Countries (OPEC), Russia and allies - collectively known as OPEC+ - agreed in April to cut supply by 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis.

On Saturday, OPEC+ agreed to extend the deal to withdraw almost 10% of global supplies from the market by a third month to end-July. Following the extension, top exporter Saudi Arabia hiked its monthly crude prices for July.

But Howie Lee, economist at Singapore bank OCBC, noted that the latest deal had fallen short of market hopes for a three-month extension of output cuts.

He said both benchmarks would require stronger bullish factors to propel prices back to where they were before March 6, when they crashed after OPEC and Russia initially failed to reach an agreement on supply 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 crash.

Low prices have drawn Chinese buyers to boost imports. Purchases by the world’s largest crude importer rose to an all-time high of 11.3 million bpd in May.

The OPEC+ move to extend cuts to July is, however, expected to lead to a supply deficit by October, aiding prices in the longer run, OCBC’s Lee added.