Crude posted its first weekly gain in a month as global production cuts start to lift physical markets. Futures in New York rose 17% this week. Oil companies have announced major production closures with Chevron Corp. saying it will shut as much as 400,000 barrels of daily output and Exxon Mobil Corp. reporting it will cut rigs in the Permian Basin by 75% by the end of the year. Concho Resources Inc. said it’s curtailing about 4-5% of its production.
At the same time, OPEC+’s pledge to trim supply by 9.7 million barrels a day has gone into effect. Algerian Energy Minister Mohamed Arkab, who holds OPEC’s rotating presidency, called on members of the cartel to implement more than 100% of their agreed production cuts.
The market has rebounded on factors including “the expectation that the OPEC+ production cuts were going to start ramping up, that we continue to see signs that oil producers are going to be cutting their drilling activity, that we are going to see supplies tighten in the coming months,” said Gene McGillian, manager for market research at Tradition Energy.
The price of real crude is reacting to the curbs, with key grades from the Caspian to the North Sea trending higher in recent days. Globally, the number of rigs drilling for oil and gas tumbled almost 20 percent in April, and in the U.S., the oil rig count dropped by 53 to 325, a seventh straight week of declines.