Oil prices rose early on Tuesday as market participants hope that the OPEC+ group may decide in the coming days to roll over for a month or two the current level of production cuts beyond June to support last month’s price rally.  

As of 10:33 a.m. EDT on Tuesday, WTI Crude was up 2.26 percent at $36.21 and Brent Crude was closing in on the $40 a barrel threshold, rising 2.37 percent to $39.20.   

Despite weak compliance from OPEC in May, as per a Reuters survey, the market bulls pin their hopes on the OPEC+ coalition being motivated enough to extend the 9.7-million-bpd cuts through July or August, longer than until the end of June as originally planned.  

According to the original agreement reached in April, OPEC+ was to cut 9.7 million bpd in combined production for two months—May and June—and then ease these to 7.7 million bpd, to stay in effect until the end of the year. Then, from January 2021, the production cuts would be further eased to 5.8 million bpd, to remain in effect until end-April 2022. Related: Three Reasons Oil Prices Are Bouncing Back

On Monday, reports emerged that the OPEC+ group could hold its June meeting this week, earlier than the initial plans to hold the teleconference on June 9 and 10. Russia, OPEC’s key partner in the pact, reportedly doesn’t mind moving the meeting to this week—a sign that Moscow might agree to extending the current production cuts beyond the end-June expiry. Russia is always the wildest card in all OPEC+ meetings, but the policy maker in Moscow, Vladimir Putin, discussed with U.S. President Donald Trump via phone the OPEC+ production cut agreements and the future of the oil market on Monday. The OPEC+ agreement, “reached with the active support of the presidents of Russia and the United States, would lead to a gradual restoration of oil demand and price stabilisation,” the Kremlin said.

Commenting on the possible outcome of the OPEC+ meeting, Citi’s head of commodities research Edward Morse told Reuters:

“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps.”    

By Tsvetana Paraskova for Oilprice.com

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