The oil market took an initially neutral view on OPEC+ deliberations that could result in the producers group announcing a short-extension to unprecedented output curbs.
Up to this point, the production curbs have been effective. Crude rallied almost 90% last month, a record gain, as reduced supply helped to offset the demand losses from the coronavirus outbreak. A key oil spread that helps dictate the flow of crude from regions including the North Sea and West Africa turned positive for the first time since March on Monday, the latest sign that crude’s recovery isn’t just financial-driven.
“The prospect of OPEC+ advancing its meeting and agreeing an extension rather than tapering of the deeper cuts should support crude’s rally this week,” said Vandana Hari, founder of energy consultancy Vanda Insights.
An earlier OPEC+ meeting would give the producer group more flexibility to change its current production limits as members usually decide their plans for shipping oil for July in the first week of June. The group’s preference is to take short-term measures on cuts as the situation is changing quickly, the delegate said. The coalition – which includes OPEC’s 13 members plus another 10 exporters — has achieved 92% compliance, according to an estimate by data analytics firm Kpler.