Oil prices pushed higher in early trade on Friday, building on gains in the previous session, after OPEC producers and allies promised to meet their supply cut commitments and two major oil traders said demand was recovering well.
Reuters reported that Brent crude futures edged up 35 cents, or 0.8%, to $41.86 a barrel, while US West Texas Intermediate (WTI) crude futures rose 38 cents, or 1%, to $touch 39.22 per barrel.
According to the report, both benchmarks rose around 2% on the earlier trading day. They are now heading towards weekly gains of 8%.
Both Iraq and Kazakhstan have announced their plans for oil production cuts to compensate for overproduction in May. This commitment also contributed to the rise in prices.
If the ‘laggard producers’ do make up for overproduction over the next three months, it will take extra barrels out of the market in an effective manner, even if OPEC+ does not extend its record 9.7 million bpd supply cuts beyond next month.
As agreed in April, the Organization of the Petroleum Exporting Countries (OPEC), including Russia and other producers, together known as OPEC+, has been curbing supply by approximately 9.7 million bpd since 1 May.
It would be recalled that earlier this month, the group also agreed to extend output cuts until the end of next month.
U.S. West Texas Intermediate (WTI) crude futures climbed 14 cents, or 0.4%, to $38.98 a barrel at 0101 GMT, while Brent crude futures crawled up 7 cents, or 0.2%, to $41.58 a barrel. Both contracts rose around 2% on Thursday.
Plans by Iraq and Kazakhstan to compensate for overproduction in May on their supply cut commitments supported the market. The promises came out of a meeting by a panel monitoring compliance by the Organization of Petroleum Exporting Countries and its allies, a grouping called OPEC+.
If the laggard producers do compensate over the next three months for their overproduction, that will effectively take extra barrels out of the market, even if OPEC+ does not extend its record 9.7 million barrels per day supply cut beyond July.
Comments from global oil traders Vitol and Trafigura on a rebound in oil demand in June, reported by Bloomberg, also buoyed the market, ANZ Research said.
Trading volumes on Friday, however, were thin, which pointed to a lack of conviction behind any big push higher, said CMC Markets chief strategist Michael McCarthy.
On the technical side, he pointed to strong resistance in the WTI contract between $40 and $41. Analysts see that level as the point at which more U.S. producers will revive shut-in wells.
“That militates against aggressive long side trading,” McCarthy said.