Oil rose to trade near $43 a barrel in London after OPEC and its allies agreed to extend historic output curbs by an extra month, promising stricter compliance to ensure members don’t pump more than they pledged.
Brent futures added as much as 2.6% after
posting a sixth weekly increase on Friday, the longest run of gains since May 2018.
The rise in oil price comes after news that China’s crude imports soared to an all-time high last month, capping an astounding rebound in oil demand after the nation’s economy was flattened by lockdowns to contain the coronavirus pandemic.
Imports surged to 47.97 million tons in May, or 11.34 million barrels a day, according to customs data on Sunday.
That’s a 15% jump from April and 160,000 barrels a day more than the previous record set in November and the figure underlines how complete the demand recovery has been in the world’s largest oil importer, even as other countries are still struggling with the impact of bruising lockdowns on their economies
It also suggests that China has been taking advantage of the collapse in prices this year to fill its strategic reserves on the cheap.
The market improvement offers oil dependent nations like Nigeria something to cheer while it also marks a victory for Saudi Arabia and Russia, which were deadlocked in a brutal price war just two months ago.
The de-facto leaders of OPEC+ showed their commitment to shore up oil markets globally over the weekend, and even cajoled Iraq, Nigeria and other laggards to fulfill their promises to reduce production.
Following the extension, Saudi Arabia made some of the biggest increases to the price of its crude in at least two decades. The steepest will hit July exports to Asia, while overall, the gains erased almost all of the discounts the kingdom made during its brief price war with Russia.
Brent for August settlement rose 1.3 per cent to US$42.86 a barrel as of 9:59 a.m. London time
Based on Brent’s relative strength index, oil is sitting in overbought territory and due for a decline
West Texas Intermediate for July delivery gained 0.9 per cent to US$39.92
The WTI strip for 2021 was at US$41.59 on Monday, the highest since March
As OPEC met virtually over the weekend, Tropical Storm Cristobal was swirling over the Gulf of Mexico. Offshore drillers idled about a third of oil production, amounting to about 636,000 barrels of daily output, due to the storm, according to the Bureau of Safety and Environmental Enforcement. The storm has now crossed the coast.
Meanwhile, Libya’s biggest oil fields are gradually resuming production after a five-month shutdown due to civil war. Output will start at an initial 30,000 barrels a day at Sharara and it will take three months to return to full capacity, according to National Oil Corp. Supply from El-Feel also restarted on Sunday, according to a person with direct knowledge of the situation.
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