OPEC, Russia and allies have agreed to extend the record oil production cuts running until the end of July. It is prolonging a deal that has already provided a large help to crude oil prices during the past two months by withdrawing almost 10% of global supplies from the market.
The group, known as OPEC+, additionally demanded countries such as; Nigeria and Iraq, who exceeded the production quotas in May and June, compensate with extra cuts in July to September.
OPEC+ had agreed in April that it would cut supply by 9.7m barrels per day (bpd) during May-June to prop up prices, following the market collapse due to the coronavirus crisis. Those cuts were due to taper to 7.7m (bpd) from July to December.
What does this mean for the oil market?
Oil prices continue as a large thanks to a pick up also in demand, with global economies gradually getting back into the swing, following the prolonged lockdown period. We are expecting them to continue to be strong from Monday, given this further collective action from OPEC and allies. Market bulls will be hunting for a return to the pre-bear market levels seen at the beginning of 2020, however, a big barrier first observed at the $42-47 price range in our view.
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