On June 2, U.S. WTI crude oil futures rose, with the settlement price of major contracts at $36.81/ barrel, up $1.37 or 3.86%. Brent crude oil futures price rose, the settlement price of main contract was $39.57/ barrel, up $1.25 or 3.26%, WTI crude oil and Brent crude oil also reached their highs in nearly three months. It is mainly driven by the expected warming of OPEC+ extended production reduction agreement and economic recovery sentiment in the United States and Europe.
Oil prices rose for four consecutive trading days as the OPEC+ video conference held on June 4 drew near and the market released the expectation of crude oil producers to extend the production reduction agreement. It is widely believed that OPEC+ is considering extending the implementation period of its 9.7 million barrels/ day production reduction agreement to July or August at this week's meeting. According to the previous agreement, the scale of production reduction from July to the end of this year will be reduced to 7.7 million barrels/ day. Saudi Arabia has always advocated deep production reduction. Previously, Russia had an ambiguous attitude on this issue. Oil price was once under pressure. Now market people generally have optimistic expectations on the production reduction agreement, and oil price naturally rebounded continuously.
In addition, according to the news, the production reduction scale and intensity of OPEC+ oil producing countries in May are still in line with the market expectation. In May, all 13 OPEC member countries implemented a production reduction of 5.84 million barrels/ day, with an average daily output of 24.6 million barrels, the lowest since 2002. Among them, Saudi Arabia has undertaken the production reduction of 2.89 million barrels, accounting for nearly half of OPEC's total production reduction share, reducing the daily output to 8.7 million barrels. It is worth mentioning that Russia's performance is also remarkable. According to the data, Russia's oil production in May was 9.388 million barrels/ day, down 15.5% year on year and 17.2% month on month. Just two months ago, Russia's crude oil production was at an all-time high, with 11.35 million barrels/ day in April. The sharp reduction of oil production in oil producing countries has balanced the problem of excess supply, and the dilemma of shortage of storage capacity has gradually broken the ice, which plays a decisive role in restraining the continued decline of oil price.
Good news continues in the market. On June 2, the inventory data released by the American Petroleum Institute (API) did not disappoint. The data showed that the crude oil inventory in the United States fell unexpectedly last week. U.S. crude oil inventories fell 483,000 barrels in the week to May 29, after analysts had expected an increase of 3 million barrels. For the week ending May 29, crude oil inventories in Cushing, Oklahoma, fell 2.2 million barrels, API said. The positive inventory data also helped the oil price rise.
The market demand is also slowly picking up. The blockade measures caused by COVID-19 have been gradually cancelled in Europe and the United States. In addition, Europe and the United States have entered the summer driving season, which further promotes the market demand for crude oil. The slow recovery of demand is also an important factor supporting the oil price. According to SunSirs, although the continuous rebound of oil price is mainly due to the centralized release of the recent market good news, in which the market plays a major role in the optimistic expectation of OPEC+ to extend the production reduction, and at the same time, the demand is also slowly picking up, but for the basic supply and demand of the crude oil market, it may take some time to return to the normal level before the outbreak, or even the duration will still be longer, in particular, the current epidemic situation is still severe. Generally speaking, if the results of this week's OPEC+ video conference are as expected, the oil price may maintain an optimistic trend, but the increase may be subject to the early release of favorable expectations. In the medium and long term, the oil price market is generally relatively cautious.
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