By Adedapo Adesanya
The US West Texas Intermediate (WTI) traded higher than the Brent Crude at the Friday session as oil prices closed the best month so far this year.
The international benchmark, Brent crude, closed by 0.11 percent or $0.04 at $35.33 per barrel, while the US West Texas Intermediate (WTI) gained as much as 5.16 percent or $1.65 to sell at $35.45 per barrel.
WTI has increased by nearly 90 percent this month, the highest increase since 1983. Still, this month’s price rise has not been enough to offset the losses that the benchmark suffered in the last three months.
Relatively, for the month, Brent gained 40 percent, for its best month since 1999 but prices for both futures are still 45 percent lower than it was at the beginning of the year.
In April, prices plunged with the international benchmark falling to its lowest in over 20 years, while the WTI had it worse, dropping below zero and into negative territory for the first time on record.
Part of the move was due to the contract’s imminent expiration, but it also reflected that no one wanted to take physical delivery of crude while demand was falling due to a lockdown to prevent the spread of the coronavirus pandemic.
But May proved to be a different month as both contracts recorded five straight weekly gain, helped by production cuts from the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) coupled with optimism about demand recovery in countries around the world.
Due to compliance from the deal, oil prices continue to do well backed up by increase in demand due to ease in lockdowns, which has brought many back on the road.
Now, talks about extending the record production cuts of 9.7 million barrels per day beyond June looks good to traders as this will help tackle the fear of oversupply, but this is yet to win support from Russia. The country said it would analyse the market before making any decision at the June 9-10 OPEC+ meeting.
The OPEC+ production cuts as they stand now will begin to reduce by two million to 7.7 million barrels per day from July 1, and the group is expected to decide on whether or not to extend the deeper cuts at the meeting.
Also adding to the good results in May, Saudi Arabia said that, beginning June 1, it would voluntarily cut an additional 1 million barrels per day on top of its portion of the cuts agreed to by OPEC+. It was then supported by Kuwait and UAE, other cartel members that followed suit and said they would also exercise additional cuts of 180,000 per barrels daily.
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