Oil rose on Monday after major producers reached an agreement on record production cuts in July, and China’s crude oil imports reached an all-time high in May.
Brent crude LCOc1 was up 51 cents, or 1.2%, at $42.81 per barrel, by 0628 GMT, while West Texas Intermediate (WTI) crude CLc1 rose 32 cents, or 0.8%, to $39.87 a barrel.
Both have reached their highest levels since March 6, with $ 43.41 and $ 40.44 at the beginning of the session.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and its allies known as OPEC + agreed and implemented a 9.7 million barrels (bpd) oil supply per day in May and June to raise prices. Prices almost doubled.
On Saturday, OPEC + agreed to extend the withdrawal agreement of approximately 10% of global supplies by third month until the end of July. Following the extension, Saudi Arabia, the top exporter, increased its monthly crude oil prices for July.
The move to extend cuts in July is expected to lead to a supply deficit by October.
According to some, the final deal, market prospects for quarterly production cuts are inadequate, stronger bull factors are required in order to reach conditions before March 6.
Low prices have increased the imports of Chinese buyers. Purchases by the world’s largest crude oil importer rose to an all-time high of 11.3 million bpd in May.
Analysts states market participants monitored compliance between OPEC members such as Iraq and Nigeria, which exceeded production quotas in May and June.
Although oil prices have recovered, they are still far below the cost of most US shale producers, leading to problems of stopping production, layoffs, and tackling in costs at the world’s largest producer.
According to the data, the number of operating US oil and gas facilities fell to a record level in the fifth week in a row until June 5th.
Approximately 30% of US offshore oil production was stopped Friday as tropical storm Cristobal entered the Gulf of Mexico.
The supply, rising oil prices, planned to be lowered in June and July, may invite US shale oil to recover. However, if the supply increases later, the balancing rate of the oil market may be reduced.