Oil prices rose on Tuesday to near three-month highs on expectations that major producers would agree to extend output cuts that have shored up prices, during a video conference likely to be held this week.
Benchmark Brent crude LCOc1 rose 2.2 percent, or 83 cents, to $39.15 a barrel as of 1215 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 climbed two percent, or 70 cents, to $36.14 a barrel. Brent has doubled in the past six weeks helped by supply cuts by the Organization of the Petroleum Exporting Countries and others including Russia, a grouping known as OPEC+.
Oil Prices Are Still 40%
But oil prices are still 40 percent down this year. OPEC+ producers are considering extending their production cuts of 9.7 million barrels per day (bpd), equivalent to about 10% of global production, into July or August, at an online meeting expected to be held on June 4.
"Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps," said Citi's head of commodities research Edward Morse. Under the original OPEC+ plan, the cuts were due to run through May and June, scaling back to a reduction of 7.7 million bpd from July to December.
Saudi Arabia has been pushing to keep the deeper cuts in place for longer, sources said. UBS analyst Giovanni Staunovo warned that a continuation of the oil price rally could unleash more stored oil onto markets and therefore prove "self-defeating".
"The marked price increase in recent weeks is bringing back crude production that was shut-in, triggering the unloading of oil stored on tankers and weighing on refinery margins," he said. Price gains have been capped by trade tension between China and the United States over Beijing's security legislation in Hong Kong, as well as manufacturing data on Monday showing the world's factories were still struggling.