Oil rises as OPEC looks to extend cuts

BEYOND JUNE

NEW YORK • Oil prices rose on Tuesday after OPEC’s de facto leader, Saudi Arabia, said it would increase supply curbs in June, while other members of the oil-producing group said they want to extend the deep cuts reached in April for a longer period than originally agreed.

OPEC and its allies, a group known as OPEC+, decided in April to cut output by 9.7 million barrels per day (bpd) for May and June, a record reduction, in response to the 30 per cent drop in fuel demand worldwide caused by the coronavirus pandemic. The group was expected to curtail that reduction to 8 million bpd, but sources told Reuters they expect OPEC+ to maintain the reduction.

U.S. West Texas Intermediate (WTI) crude futures settled at US$25.78 a barrel, up US$1.64, or 6.8 per cent. Brent crude futures settled at US$29.98 a barrel, gaining 35 cents, or 1.2 per cent.

On Tuesday, four sources told Reuters that OPEC and its allies want to maintain the 9.7 million bpd cut beyond June, when the OPEC+ group is next due to meet. “They don’t want to reduce the size of the cuts,” one OPEC+ source told Reuters.

Saudi Arabia said on Monday it would add to existing cuts by reducing output another 1 million bpd next month, slashing total production to 7.5 million bpd, down nearly 40 per cent from April.

The United Arab Emirates and Kuwait also committed to slashing 180,000 bpd, adding to reductions the producers agreed to under a deal.

“The idea that the Saudis and Kuwaitis and the UAE said that they’re going to enact deeper cuts than they initially agreed upon is helping the market find support,” said Gene McGillian, vice-president of market research at Tradition Energy in Stamford, Conn.