OPEC and its allies edged closer to a consensus on extending production cuts to prop up the oil market, even as wrangling continued for a third day about whether to bring forward their next meeting.
Russia and several other OPEC+ nations favor extending the group’s current output curbs by one month.
The cuts are currently due to run through 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.
And so rabid optimism takes hold of the market and is driving prices to levels which if I had told you the market would reach here a couple of months ago, you probably would have laughed me out of the room.
There is the age old rule of thumb to buy the rumour and sell the fact, and that fact is the oil cartel actually agreeing and implementing the cuts. They haven’t always been forthcoming with the actual truth of how much they have taken out of production.
Also don’t forget that as soon as more good news comes in on the demand side, this new agreement will quickly fall apart, which is why I imagine Russia are pushing for a shorter extension.
Another bullish factor that is helping edge up prices is the prediction that US oil stocks fell 483k bbls last week. We will have to wait until later today to get the real numbers form the EIA, but, for now, it seems that the stars are aligning for oil producers once again. (FIS)