On expectation that the Organization of Petroleum Exporting Countries, OPEC, is likely retaining supply cut agreement to prevent prices from tumbling amid broad economic slowdown which has started affecting fuel demand growth, oil prices reacted positively on Tuesday.
Front-month Brent crude futures, the international benchmark for oil prices, were at $62.36, which is 7 cents, or 0.1 per cent, above Friday’s close.
Also, the US West Texas Intermediate, WTI, crude futures were at $53.42 per barrel, 16 cents, or 0.3 per cent, above their last settlement.
Prices fell by around 1 per cent in the previous session and crude futures are down by some 20 per cent from their 2019 peaks in late April, dragged lower by a widespread economic downturn that has started to impact oil consumption.
Russia on Monday said it might support an extension of supply cuts that have been in place since January, warning oil prices could fall as low as $30 per barrel if producers supply too much crude.
The OPEC and some non-affiliated producers including Russia, known collectively as Opec+, have withheld supplies since the start of the year to prop up prices.
Opec+ is due to meet in late June or early July to decide output policy for the rest of the year.
“Due to the general fear of an economic downturn and the realization that demand growth is slowing no one will argue for abandoning the Opec+ accord,” said Fereidun Fesharaki, chairman of energy consultancy FGE, in a note published on Tuesday.
FGE said global crude oil demand growth could drop below 1 million barrels per day (bpd) in 2019, down from previous expectations of 1.3 to 1.4 million bpd.
“This effectively gives us an extra 300,000-400,000 barrels per day of supply,” said Fesharaki.
Meanwhile, Saudi Energy Minister Khalid al-Falih said Russia was the only remaining oil exporter still undecided on the need to extend the global output deal between OPEC and its allies until the end of the year, TASS news agency reported on Monday.
Falih, who was in Moscow on Monday, said he and Russian Energy Minister Alexander Novak may have final opportunity to discuss the deal this month at a G20 meeting in Japan before OPEC and its allies hold a policy meeting in Vienna.
It is expected that countries that signed up to a global pact on oil production cuts will reach a consolidated decision on what will happen when the existing pact expires at the end of June, Russian Deputy Energy Minister Pavel Sorokin said.
Sorokin, in an interview with Reuters, said that in any event, cooperation will continue between members of the existing pact which includes OPEC and some major non-OPEC producers, led by Russia.
He said a decision on the future of the deal would be made based on whether the global oil market is balanced. He said the situation on the market should be clearer by the time of a G20 meeting scheduled to take place in Osaka at the end of June.
Speaking on the sidelines of last week’s St Petersburg International Economic Forum, Sorokin said one of the market factors to be taken into account will be the state of trade relations between China and the United States.
“We will take a decision based on what the market needs,” he said, in comments that were cleared for release on Monday. “We will take a consolidated decision; in any case cooperation will continue.”
But, Russian Energy Minister Alexander Novak said on Monday he could not rule out a scenario in which oil prices could fall to $30 per barrel if the global oil deal was not extended.
Novak said there were big risks of oversupply on the market and that Moscow needed to monitor the oil market more in order to be able to take a balanced decision in July.
Saudi Energy Minister Khalid al-Falih, who was in Moscow for talks with his Russian counterpart, said steps were being taken to prevent a sharp fall in oil prices.