Crude oil futures rose today boosted by a report that major oil producers will gather tomorrow to review plans for extended production cuts along with an astonishing monthly ascent in U.S. jobs hinting at a recovery in energy demand.
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, are expected to meet through videoconference tomorrow in the OPEC member conference followed by an OPEC+ conference to begin hours later.
The major oil producers are anticipated to get into a consensus to prolong production cuts of 9.7 million barrels a day through July. The group agreed to shift the initial meeting that had been planned for June 9-10, after a tentative proposal to assemble on June 4 didn’t materialize.
The weekend meeting is being seen as a sign to crude investors that the group may be more likely to produce substantive near-term steps to maintain oil’s value.
“It’s all about the OPEC+ meeting,” wrote Bjornar Tonhaugen, Rystad Energy’s head of oil markets, in a Friday note. “As it was initially intended to happen on 4th June when that did not materialize, prices fell because traders sensed a lack of agreement between the extended group’s producing countries.”
“Now the mood has changed again and prices rose, following news that a consensus may have been reached and a meeting is across the corner,” he mentioned.
Meanwhile, U.S. data released today showed that the nation regained 2.5 million jobs in May and the unemployment rate fell to 13.3% leading to a recovery in the stock market.
“The oil price rally went into overdrive after a surprisingly robust U.S. labor market report,” stated Edward Moya, senior market analyst at Oanda, in a market update. “The economic recovery is already happening and that could do wonders for crude consumption.”
Oil had endured largely from closings dedicated to controlling the spread of COVID-19, which brought down demand. Reviving plans across the globe, however, have spurred new life into the asset.
OPEC member Saudi Arabia and nonmember Russia had agreed on earlier this week to extend current OPEC+ supply cuts of 9.7 million barrels per day through July, but discussions toward an official agreement had been held up as the two countries denoted that other OPEC+ members have failed to comply with their promised reductions.
Report of a conditional agreement to prolong production cuts between OPEC+ members comes after Iraq and Nigeria pledged to improve their compliance with any future deals. Iraq reduced only half of its commuted one million barrels a day in May and Nigeria brought down 52% of the amount agreed as a part of the April pact.