The price of Brent crude rose to $40 on Wednesday for the first time since March, as optimism mounted that major producers will extend production cuts and recovery from the coronavirus pandemic will spur fuel demand.
NAN reports that Brent crude futures for August hit $40.42, the highest since March 6
The US West Texas Intermediate (WTI) crude futures also hit $37.88, the highest since March 6.
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 Organisation of the Petroleum Exporting Countries (OPEC) and other major producers including Russia, a group known as OPEC+, may extend production cuts of 9.7 million barrels per day (bpd), or about 10 percent of global output, into July or August, sources told Reuters.
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.
With the date of the meeting not yet set and some calling for it to be early as this week, much remains up in the air
The demand picture is looking brighter as economies including China, the world’s second-biggest oil consumer, start to recover from the pandemic.
“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.