Oil headed for a sixth weekly gain after OPEC+ reached a tentative agreement to prolong its record production cuts.
Brent crude was back above $40 a barrel, while futures in New York rose 2% on Friday. After almost a week of wrangling, Saudi Arabia and Russia clinched a deal with Iraq over its compliance, paving the way for the agreement’s extension into July instead of tapering them. OPEC will meet at 1 p.m. London time on Saturday, followed by a gathering of the wider group later to sign off on the pact, delegates said.
While oil has recovered rapidly from its plunge below zero in mid-April, the pace of the rebound has slowed in the past couple of weeks. Demand is quickly returning in China, but questions remain for many other nations, especially for consumption of diesel, the biggest-selling oil product globally.
A continuation of crude’s price rally could also encourage more American shale producers to bring wells back and lead to a fraying of the consensus within OPEC+, leaving the alliance with a delicate balancing task.
“OPEC+ will take one month at a time here,” said Bjarne Schieldrop, chief commodities analyst at SEB AB, which “makes sense since demand outlook visibility is so low.”
- West Texas Intermediate for July delivery rose 76 cents to $38.17 a barrel as of 10:19 a.m. in London
- It’s up 7.4% this week, on track for the longest run of weekly gains since April 2019
- Brent for August settlement added 2.7% to $41.06 a barrel
- Dated Brent, used to price more than two-thirds of the world’s oil, was at $37.71 on Thursday, according to traders monitoring prices from S&P Global Platts
Riyadh and Moscow, on opposite sides of a vicious price war until a deal in April, are now united against countries who have consistently failed to shoulder their share of the burden. Russia, a habitual laggard, has complied punctiliously with the most recent cuts and wants to make sure others are too.
Saudi Aramco has also delayed the release of its July crude pricing until Sunday at the earliest, according to people with knowledge of the situation, as it waits for clarity on the extension of production cuts.
“The world’s oil exporters, including members of the OPEC+ alliance, do not want prices below $30 a barrel, but there’s no consensus on how much higher prices should be,” said Victor Shum, vice president of energy consulting at IHS Markit. If Dated Brent prices move into the $40 to $50 a barrel range there would likely be policy divergence between the Saudis and Russia, he said.
Other oil-market news:
- A supertanker carrying up to 2 million barrels of American crude is steaming toward China, in the latest sign that demand in the world’s second largest oil consumer is on the rebound.
- A massive fuel spill in Siberia prompted Russia to declare a state of emergency in the region as the mining company involved said the catastrophe may have been caused by climate change.