By Shu Zhang and Sonali Paul
SINGAPORE / MELBOURNE (Reuters) – Oil prices rose on Tuesday and traders were waiting to see if major producers agree to expand their huge production cuts at a virtual meeting expected later this week to support prices.
Brent crude futures rose 0.91% or 35 cents to $ 38.67 a barrel as of 0427 GMT.
West Texas Intermediate (WTI) crude oil futures rose 0.56% or 20 cents to $ 35.64 a barrel.
Brent has doubled in the past six weeks thanks to cutbacks in supplies from the organization of oil-exporting countries and allies, including Russia, to a group called OPEC +.
However, both Brent and WTI prices have still fallen by around 40% so far this year.
“The whole story is very much based on supply cuts and recovery in demand,” said Commonwealth Bank commodity analyst Vivek Dhar.
At an online meeting that is expected to take place on June 4, OPEC + manufacturers are considering expanding their production cut by 9.7 million barrels per day (bpd), about 10% of global production, to July or August.
“Most likely, OPEC + could extend the current cuts until September 1st. Until then, a meeting should take place to decide on the next steps,” said Edward Morse, head of raw materials research at Citi.
According to the OPEC + plan agreed in April, the record supply for May and June should be reduced, from July to December to 7.7 million bpd. Saudi Arabia has had talks to push the expansion of stronger cuts further, sources told Reuters last week.
“Russia will be the main obstacle to any renewal, and they are unlikely to agree on an extension that will last for a few months,” analysts from Dutch bank ING said.
An extension could push the oil price down to $ 40, but this commitment would need to be implemented to maintain higher prices, Dhar from the Commonwealth Bank said.
A drop in crude oil reserves in Cushing, Oklahoma, which fell to 54.3 million barrels in the week ending May 29, also drove prices, traders said, citing a Genscape report on Monday.
However, a preliminary Reuters survey found that total U.S. crude stocks are likely to have increased in the past week.
Trade tensions between China and the United States over Beijing’s security measures in Hong Kong and Monday’s production data showing Asian and European factories are struggling have kept profits under control.
(Reporting by Shu Zhang and Sonali Paul; editing by Richard Pullin and Tom Hogue)