The OPEC+ technical committee met with a twin purpose on Thursday — discussing additional cuts and also to review the impact of the cut — did not make any additional recommendations for further production cuts, but focused instead on members who are failing to adhere to the current agreement, OPEC+ sources said.
Oil prices pushed higher in early trade on Friday, building on gains in the previous session, after OPEC producers and allies promised to comply with supply cut commitments and two major oil traders said demand was recovering well.
Commenting on the market enthusiasm, Rystad Energy’s Senior Oil Markets Analyst Paola Rodriguez Masiu said, “It’s clear, there is enthusiasm in the market that oil supply is still under control. A positive OPEC+ meeting does that and yesterday’s (Thursday) session helped renew confidence that members will further cut production to comply with the 9.7 million bpd agreement.
For Iraq in particular, it is critical for the OPEC+ alliance that the country appears to have a mechanism in place to align with the voluntary cuts.
Promising signs through cuts in export nominations to term buyers have been announced and exports are trickling lower into the first three weeks of June.
Masiu added, “The compliance level has already been higher than most of the market participants expected and it seems that a better level is achievable.
“Prices from now on should grow naturally, without further artificial support from the supply side. Demand will be the force that will drive the market recovery from now on,” she added.
Despite the demand concerns clouding the demand recovery, for now, positivity is now in the driving seat.