Oil prices rose more than 2 percent on Tuesday, extending gains ahead of expected output cuts by producer cartel OPEC and a reduction in Canadian supply. The Middle East-dominated Organization of the Petroleum Exporting Countries will meet on Thursday in Vienna to agree future output and will discuss strategy with other producers outside OPEC, including Russia. OPEC and its allies are working towards a deal to reduce output by at least 1.3 million barrels per day (bpd), OPEC sources have told Reuters, adding that they were still talking to Russia about the extent of its production cuts. Click read more below for additional detail.
Oil rose on Tuesday, holding above $70 a barrel for a third day, supported by concerns that tensions in the Middle East could lead to supply disruptions, although with global output rising fast, investors remained cautious.
Brent crude futures LCOc1 were up 28 cents on the day at$70.40 a barrel by 0848 GMT, while West Texas Intermediate (WTI) crude futures CLc1 were up 19 cents at $65.74 a barrel.
The oil price has risen by more than 7 percent so far this month and by 5.3 percent in the first three months of the year, putting it on track for a third consecutive quarterly gain, something the market has not witnessed since late 2010.
Geopolitics and expectations of the world’s largest exporters controlling supply have helped push Brent above $70 this year for the second time since late 2014, but analysts said this strength may not persist for long.
“The recent rally in oil prices might have taken some by surprise as the underlying fundamental picture does not justify Brent being close to $70/bbl. This view is based on the simple fact that non-OPEC oil supply growth will trump the increase in global oil demand this year,” PVM Oil Associates analyst Tamas Varga said.