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Oil hits three-month high over hopes for output cuts

Commodities Jun 02, 2020 08:45PM ET
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© Reuters. The sun sets behind a pump-jack outside Saint-Fiacre

TOKYO (Reuters) - Oil rose on Wednesday to a near three-month high amid optimism that major producers will extend production cuts as the world recovers from the coronavirus pandemic.

Brent crude was up 22 cents, or 0.6%, at $39.79, by 0003 GMT, the highest since March 6, having gained 3.3% on Tuesday.

U.S. West Texas Intermediate crude (WTI) gained 33 cents, or 0.9%, at $37.14, also the highest since March 6. The contract ended the previous session up 3.9%.

Both benchmarks have risen sharply in recent weeks from the lows of April, buoyed by a continuing recovery in China, the epicentre of the virus outbreak, while other economies are slowly opening up after lockdowns to contain its spread.

The Organization of the Petroleum Exporting Countries and others including Russia may extend production cuts of 9.7 million barrels per day (bpd), or about 10% of global output, into July or August, sources told Reuters.

A meeting of the grouping known as OPEC+ is expected to be held online on Thursday. The cuts are currently due to run through May and June, scaling back to a reduction of 7.7 million bpd from July to December, but Saudi Arabia has been pushing to keep the deeper cuts in place for longer.

"As virus-related lockdown measures continue to be lifted, we expect that demand will gradually recover," Capital Economics said in a note, estimating that global oil consumption will fall to just under 92 million bpd on average in 2020.

This compared with 100.2 million bpd in 2019, it said, before the pandemic swept through Europe and the United States, evaporating demand for everything from flying to trips to the dentist.

Oil is likely to end up in "a small deficit later this year, which should provide some additional support to prices," it added.

Oil hits three-month high over hopes for output cuts
 

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Comments (5)
Fairway Litchfield
Fairway Litchfield Jun 02, 2020 10:54PM ET
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Oil is used in electric cars as plastics and as typical oil usage for relieving friction in parts of the engine.The world will never completely be without oilBuy oil stocks such ad Diamond Offshore, PSX, and fracking stocks OAS, et al.
Ambrose Ho
Ambrose Ho Jun 02, 2020 10:10PM ET
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There will be NO oil required in TSLA dream car world. Buy electricity, say NO to oil, safe the planet!
samer monir
samer monir Jun 02, 2020 10:10PM ET
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Tsla needs oil to produce the EV
Fairway Litchfield
Fairway Litchfield Jun 02, 2020 10:10PM ET
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If there are moving parts there is need for oilElectric has to do with initial powerWhat about grease that is made if oil
Kilo Byte
Kilo Byte Jun 02, 2020 10:10PM ET
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What are you going to make the plastic components out of, soy boi?
Alan Rice
Alan Rice Jun 02, 2020 10:06PM ET
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Oil under $100/ bbl !! Road trip !!!
Eunita Robinson
Eunita Robinson Jun 02, 2020 9:40PM ET
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We use oil for everything. oil will be over $40 a barrel. The protest is driving the market up. Oil is brought by the protesters, Cops, military and states reopen oil for shipments.
Mark Maxwell
MaxAnalysis Jun 02, 2020 9:22PM ET
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It will be interesting to see if we actually hit peak oil at 100.2m ppd. Demand could take much longer than expected to recover than expected from the pandemic even as the automotive industry moves away from gasoline towards electrification.
 
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