Oil climbs over 2% after Opec+ extends output cuts to end-July

Oil climbs over 2% after Opec+ extends output cuts to end-July

The group, known as OPEC+, extended its almost 10 million barrel per day output cut by one month - through the end of July - in an effort to restore supply and demand imbalances and boost energy prices.

HSBC raised its 2020 Brent oil price forecast to $39 from $37 per barrel and its outlook on West Texas Intermediate (WTI) to $34.60 from $32.80.

Saudi Arabia - which had curtailed output by more than its agreed quota - said at a press conference Monday that those extra reductions will last just one month as planned, as the measures have served their goal.

On Sunday, Saudi state oil company Saudi Aramco hiked its July selling prices for crude grades to all destinations in a move likely to discourage buying for storage but rather could help to lower inventories. They agreed on Saturday to sustain those cuts through July.

"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. China's crude imports surged to a record high last month, while consumption in other major economies such as India is improving.

Low crude prices have prompted Chinese buyers to boost imports.

Gift From The Gulf

"The voluntary cut has served its objective and we are moving on". OPEC+ will prolong its historic curbs for an extra month and while the group cajoled Iraq, Nigeria and others to fulfill their promises to reduce production, concerns remain about the laggards sticking to their pledge.

Libya's supply could also rise soon as two major oilfields have reopened after months of a blockade that shut off most of the country's production.

"The potential return of Libyan output could also cause considerable challenges for the Opec leadership".

The number of operating USA oil and natural gas rigs fell to a record low for a fifth week in a row in the week to June 5, according to data from Baker Hughes Co.

In the U.S. Gulf of Mexico, offshore drillers idled about a third of oil production, amounting to about 636,000 barrels of daily output, due to Tropical Storm Cristobal, according to the Bureau of Safety and Environmental Enforcement.

Stay-at-home orders aimed at slowing the spread of COVID-19 removed 30 million barrels per day of global demand at a time when Saudi Arabia and Russian Federation, two of the largest suppliers, were pumping out record amounts of oil due to a price war. Output will start at an initial 30,000 barrels a day at Sharara and it will take three months to return to full capacity, according to National Oil Corp.

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