THE price of Brent crude has hit a three-month high amid hopes that major exporters will extend the record production curbs they agreed to try to halt the slump triggered by the coronavirus.
Brent sold for $39.31 per barrel yesterday up $0.99/bbl or around three per cent on the day.
The increase left Brent trading at the highest level since early March. Boris Johnson introduced the lockdown in the UK on March 23.
Brent fell to an 18-year low of $15.98/bbl in April as the fallout from the coronavirus sent demand for oil plunging.
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The price has rallied following moves by the Opec+ group of countries to prop up the market and the easing of lockdown measures in some countries.
Yesterday’s increase appears to have been fuelled by talk that Opec+ members are preparing to leave the cuts they agreed in April in place longer than expected.
Bjornar Tonhaugen, head of oil markets at the Rystand Energy consultancy, said: “Opec+ cuts are clearly working with solid help from recovering crude oil demand, especially in Asia. An extension of the current cut levels will definitely be a further boost for the market.”
The deliberations of Opec+ members will be followed closely in the North Sea industry, which is facing the prospect of a deep downturn following the fall in prices this year.
Recent developments may have encouraged some North Sea players to hope things may not turn out as badly as feared.
However, Brent crude is still selling for around 40 per cent less than it fetched in January.
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The Opec+ group, whose members include Saudi Arabia and Russia, agreed in April to cut production by 9.7 m barrels per day from May 1 until the end of June to help offset the impact of the coronavirus on demand. The programme of cuts is due to be reduced to 8m barrels per day from July.
Reuters reported that Saudi Arabia was leading discussions about sustaining the production cuts at 9.7m barrels daily for the remainder of the year amid opposition from Russia, citing unnamed sources. Russia is thought to favour an extension lasting one or two months.
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The Opec+ group is expected to hold an online meeting on Thursday June 4 to discuss the curbs. It was originally scheduled to meet on June 9 and 10.
West Texas Intermediate crude sold for 36.25/bbl yesterday afternoon.
The price of WTI turned negative briefly in April amid fears storage capacity in the US would be exhausted. That meant sellers had to pay people to take crude off their hands.
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