Oil prices spiked by almost 90% in May

Marco Green
June 2, 2020

Oil prices have rallied from historic lows since the Organization of Petroleum Exporting Countries and partners put an end to a vicious price war by implementing cuts on a record scale.

According to Interfax, Russia's oil production in May was 9.39 million barrels per day (bpd), down from 11.35 million bpd in April.

OPEC+ and its allies will decide as soon as this week whether or not to extend their historic output curbs, yet how long and to what extent global production curtailments remain in place will be crucial to sustaining crude's rally after a record rebound last month.

Fears of a second wave of infections make predictions of a recovery perilous. That would help push Brent toward $40 a barrel, he said.

Thus, it looks like the extension of current production cuts for two more months is the most likely scenario.

Friction has emerged between Russian Federation and Saudi Arabia, the two countries responsible for triggering a price war in March that along with the pandemic sent oil prices crashing.

"It is the proposal now, but it is yet to be finalised", one OPEC+ source said of the one to two-month extension. US West Texas Intermediate (WTI) crude climbed 2 per cent, or 72 cents, to $36.16 a barrel. Parsley Energy Inc. will return most of its curtailed output in early June, the company said in a presentation.

On Tuesday, OPEC members were still wrangling over when to hold their next meeting. "The group is also considering bringing forward its next planned meeting to the 4 June". 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.

Meanwhile, the U.S. Oil Fund ETF will begin its monthly roll of futures contracts on Monday.

The group is likely to hold an online meeting on June 4 to discuss output policy, after Algeria, which now holds the presidency of OPEC, proposed a meeting planned for June 9-10 be brought forward. Saudi Arabia, Kuwait and the United Arab Emirates then made further voluntary cuts of about 1.2 million barrels a day for June, bringing the total OPEC+ curbs to nearly 11 million barrels a day.

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.

Other reports by Click Lancashire

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