Crude Oil Rally Hindered by Gap Resistance, OPEC+ Meeting in Limbo

Brent oil surpasses $40 a barrel after collapse of OPEC+ deal

Crude prices, which topped $40 a barrel for Brent this week partly on hopes that the cuts would be extended, reflected the late uncertainty, and slipped back to just over $39.

OPEC and non-OPEC allies were originally scheduled to review their production cuts on June 9-10. U.S. West Texas Intermediate (WTI) crude futures were down 1.8 percent at $36.62. The session high of $40.53 was the highest since March 6.

"That would imply OPEC+ would go back to what they agreed in April, which was to ease their supply cuts to 7.7 million bpd from July, " he said.

Prices also received headwinds from the USA, as data reported yesterday by the DOE suggest that easing the lockdown is not having the desired effect in the United States demand, noted the analyst.

Encouraged by signs of recovery in the market, OPEC+ is considering extending the current level of cut beyond June.

But they failed to agree on holding an OPEC+ meeting on Thursday to discuss the cuts, with OPEC sources saying it would be conditional on countries that have not complied with their targets so far deepening their cuts.

"There are discussions between the ministers about the possibility of making up for poor May compliance in June and July", one OPEC+ source said, declining to be identified.

Oil had previously rallied on expectations that producers led by Saudi Arabia and Russian Federation would extend the supply curbs, which amounted to 9.7 million barrels a day, or around 10% of global production, in May and June. Nigeria and Iraq are considering the proposals for stronger compliance.

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I can not give you any fundamental reason other than some type of massive production cut that crude oil should continue to go higher, but ultimately it looks as if the market needs to fill this gap above, which is quite common. The White House is suspending passenger flights to the Chinese airlines as relations between the two leading economies deteriorate, while civil unrest across America is complicating the economic recovery from the coronavirus and risking a second wave of infections.



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