- Calls For Out Put Cuts Extension
- Declining Cushing Oil Stock Piles
- Saudi Arabia Production Cuts Push
Oil price opened higher in Tuesday trading session after coming under pressure in early Monday trading session. Brent crude price rose 0.3% to $38.44 a barrel as traders reacted to calls for an extension in production cuts to curb glut in supply in the oil markets.
Oil Prices Surge
Production cuts of up to 9.7 million a barrel a day have helped stabilize prices above the $30 a barrel level, after plunging to record lows at the peak of COVID-19 pandemic in March. Brent prices have more than doubled over the past six months as OPEC countries agreed on production cuts to curb a glut in supply.
Oil prices were up in the Monday trading session after it emerged stockpiles at Cushing, Oklahoma fell by 54.3 million barrels in the week ending May 29. The drop signals a spike in demand as more U.S states continued to ease lockdown restrictions.
However, prices have so far struggled to rally past the psychological $40 a barrel level. Brent and WTI prices are also down by about 40% for the year.
Production Cuts Push
Talk of OPEC agreed to extend output cut of 9.7 million barrel per day into July or August has helped support prices at current highs. Everything should be clear on June 4 as OPEC producers are poised to meet and discuss extending the duration of the production cuts.
Saudi Arabia is one of the countries pushing for a prolonged period of production cuts as it continues to feel the effects of oil prices trading at record lows. The country is pushing for an extension of the cuts to the end of the year. However, it is yet to receive support from Russia.
An agreement to push the production cuts beyond June could help push prices above the $40 a barrel level. However, demand will also have to pick up substantially to curtail a glut in supply that has so far continued to take a toll on prices.