Oil prices gain with OPEC+ holding the line on supply cuts

Oil prices rose more than one per cent on Friday, adding to gains in the previous session, after OPEC producers and allies promised to meet commitments on cutting supply and two oil traders said demand was recovering well.

Brent crude LCOc1 futures rose 61 cents, or 1.5 per cent, to $42.12 a barrel by 0639 GMT, the in more than a week.

U.S. Texas Intermediate (WTI) crude CLc1 futures climbed 60 cents, or 1.5 per cent, to $39.44 a barrel.

Both contracts rose about two per cent on Thursday and are heading for weekly gains nearly nine per cent.

Plans by Iraq and Kazakhstan to make up for overproduction in May on their supply cut commitments supported the market.

The promises came out a meeting by a panel monitoring compliance Organisation the Petroleum Exporting Countries and its allies, a grouping called OPEC+.

Prices are showing “solidity these levels, as oil markets ignore the concerns rolling across other asset classes the moment,” said Jeffrey Halley, senior market analyst OANDA.

“That suggests that prices are supported by physical buyers (which) is welcome as it implies that physical demand across the globe is recovering, its implications for economic ,” he added.

Brent moved into backwardation on Thursday for the first time since early March, the August rising to 9 cents above September LCOc1-LCOc2 on Friday.

Backwardation occurs when near-term contracts are trading higher prices than outer , compared a contango market structure where outer trade higher prices.

Fears about dwindling storage capacity had sent the market into steep contango, as wide as $5, as coronavirus lockdowns hit near-term demand and Saudi Arabia and Russia glutted the market with crude in April.

Comments from global oil traders Vitol and Trafigura on a rebound in oil demand in June, reported by Bloomberg, also buoyed the market, ANZ said.

Traders shrugged off another build in U.S. crude inventories to a new record.

Crude stocks USOILC=ECI rose by 1.2 million barrels last week to 539.3 million barrels, compared with expectations from a Reuters poll for a decline of 152,000 barrels.

On the technical side, CMC Markets strategist Michael McCarthy pointed to strong in the WTI between $40 and $41.

Analysts see that as the point which more U.S. producers will revive shut-in wells. (Reuters/NAN)