Oil rises with producers favouring one-month extension of cuts
By Bloomberg |
June 2, 2020, 7:02 a.m. |
Oil advanced as investors eyed a potential extension of record production curbs by OPEC+ while physical markets showed renewed signs of tightness.
Futures in New York rose 1.9 per cent. Russia and several allies in the Organization of Petroleum Exporting Countries are said to favor prolonging current cuts by one month, with a consensus emerging within the OPEC+ group, delegates said. It was unclear whether key power broker Saudi Arabia had agreed to the suggestion, with the kingdom supporting an extension as long as three months.
Crude also rallied as the market for real barrels showed signs of strength. The bearish structure in the nearest futures contracts briefly disappeared, signaling tighter supply. Russian Urals crude was bid last week at the highest level since Bloomberg began compiling the data, as the nation accelerated production cuts.
OPEC+ is preparing for talks this week or next, against what’s still a very uncertain demand backdrop. Tankers idling off the Chinese coast waiting to unload are evidence of the Asian giant’s rapid recovery, but in other parts of the world the rebound is uneven.
“It seems Russia is happy with current prices and believes in a faster re-balancing of the oil market than some OPEC members,” said UBS Group AG analyst Giovanni Staunovo.
West Texas Intermediate for July delivery rose 1.9 per cent to $36.11 a barrel as of 8:44 a.m. in New York.
Brent for August delivery climbed 2.2 per cent to $39.15 a barrel.
Russia came close to hitting its OPEC+ production target in May, pumping 9.388 million barrels a day. Seaborne exports of the nation’s Urals crude will shrink to their lowest level in five years in June, according to data compiled by Bloomberg.
There’s also the risk that as prices rise, shale drillers will bring supplies back online. Parsley Energy Inc. will return most of its curtailed output in early June, the company said in a presentation.
“It will be a question of how much price gains do you really want with the risk of the return of U.S. shale oil?” said Olivier Jakob, managing director of Petromatrix GmbH.
© 2020 Bloomberg L.P.