ALEXANDRIA, Va.—Crude futures in New York rose yesterday in tandem with a broader recovery in equities markets, Bloomberg reports, indicating that OPEC members intend to comply with recently promised oil-production cuts.
Futures rose 0.9% in New York after earlier falling as much as 2.6%. Saudi Arabia commended Iraq for implementing almost all its pledged oil-production cuts, and Nigeria has announced it was committed to hitting its target.
“It’s all about risk appetite and the hope of continued demand growth here,” said Bart Melek, global head of commodity strategy at TD Securities. Iraq and Nigeria pledging “to live up to their supply cut commitments made investors comfortable to take a long stance on oil.”
Earlier, prices had fallen amid growing outbreaks of coronavirus, signaling red flags for oil demand. On Monday, California, one of the largest gasoline-consuming states in America, said that it would slow reopening efforts.
In the longer-term, OPEC expects demand for crude to rebound in 2021, surpassing levels seen before the pandemic, as rival producers struggle to revive output. An OPEC+ committee meets today to discuss easing record supply curbs that have helped the market recover. OPEC+ is expected to continue efforts to taper the cuts from August even as COVID-19 cases increase in many parts of the world.
In its monthly report, OPEC cautioned that “efficiency gains, including tele-working and teleconferencing, may cap oil demand gains in 2021 to remain below precrisis levels of 2019,” the Wall Street Journal reported. Investors are increasingly concerned about a rising number of COVID-19 cases around the U.S, which could dampen the recovery in the oil market and the broader global economy.
West Texas Intermediate for August delivery rose 19 cents to $40.29 a barrel in New York. Brent for September settlement gained 18 cents to $42.90 a barrel.