Oil prices are experiencing a day when they hope to reduce the fear that a global recession may be deeper than expected after the coronavirus crisis.
Brent crude LCOc1 was up 83 cents, or 2.5%, at $33.88 a barrel by 0936 GMT after falling more than 3% on Monday. West Texas Intermediate (WTI) crude CLc1 was up 95 cents, or 3.6%, at $27.03, having dropped nearly 8% in the previous session.
Oil prices are based on a 10 million bpd production reduction agreement with market expectations. Major oil producers of the world, including Saudi Arabia and Russia, are expected to agree to cut their output at a meeting Thursday.
Worldwide oil demand fell by up to 30%. After a supply surplus in the oil market of 28 million bpd in April and 21 million bpd in May, the globally coordinated production cuts that are really needed may be too large for producers to accept.
Other producers, the Organization of the Petroleum Exporting Countries (OPEC) and its allies,which is the group known as OPEC +, including Russia, had reduced production tremendously, despite USA had increased their production to become the largest crude producer in the world..
There are questions as to whether the U.S. will participate in any coordinated action with the production cut, as US oil producers’ coordinated actions with it typically mean violation of antitrust laws.
The USA does not hold itself responsible for the situation in which the oil market has fallen. Meaning that other negatives have reduced the demand and the rest is left to be experienced. As if the prices are falling automatically, you have to see and face what will happen.