By Adedapo Adesanya
It was a bullish run for crude futures on Monday as compliance from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) saw the overall implementation of its pledged production cuts in July of more than 95 per cent.
The international benchmark, Brent crude, rose by 52 cents or 1.16 per cent to $45.32 per barrel. Also, the United States West Texas Intermediate (WTI) crude gained 82 cents or 1.95 per cent to trade at $42.83 per barrel.
The prices opened in the green territory on Monday as delegates made the disclosure before a meeting of the OPEC+ Joint Technical Committee to formally assess compliance.
Since May, the oil-producing nations have been cutting output by record levels to curb supply and reduce worldwide inventories and despite a few laggards in the past, July’s number was an improvement even with the removal of voluntary cuts.
Investors will now wait on a ministerial OPEC+ committee, known as the Joint Ministerial Monitoring Committee (JMMC) on Wednesday, August 19. The team will review the oil market and compliance with the global oil supply reduction pact, although no change in the agreement is expected.
Analysts noted that unlike the July JMMC when the market was waiting for guidance on an extension of the deepest of supply cuts to August, at this meeting, there is no supply policy determination to make. It was noted that expectations from the committee is to reinforce the same message of compliance and group discipline as it did at the July meeting.
In August, OPEC+ eased its agreed cuts to 7.7 million barrels per day from 9.7 million barrels per day previously.
The group is planning to return about 1.5 million barrels a day to the market this month after trimming roughly 10 per cent of global supply following a crash in demand due to the pandemic and this raises the question on rising supply.
Iraq has also made its strongest commitment yet to implement deep output cuts, including deeper cuts in the coming months to compensate for missing previous targets.
Prices found support after it was disclosed earlier in the day that China was living up to its end of the trade deal the two parties signed in January.
US President Donald Trump said Monday that even though the nation has fallen short so far of promised purchases of US products, Chinese state-owned oil firms have tentatively booked tankers to transport at least 20 million barrels of US crude for August and September.
This signified improved demand in the largest importer and the market subsequently reacted positively to it.
Dipo Olowookere