Oil hits three-month high over hopes for output cuts

Oil hits three-month high over hopes for output cuts

Oil hits three-month high over hopes for output cuts

Oil erased gains in NY, trading at $36.79 a barrel as of 6:10 a.m. local time.

The two leaders of OPEC+ told other members that talks planned for early June to discuss extending record output cuts may not happen if countries including Iraq and Nigeria don't make firm promises to implement their supply curbs, said people familiar with the matter.

Brent crude futures for August LCOc1 were down 13 cents, or 0.3%, at $39.43 by 10:48 a.m. EST (1548 GMT). On a break higher, the next upside target comes in at $40.11.

Subscribe now to stay ahead with the most trusted business news source. Those increased offset a larger-than-expected decline in crude stockpiles, dragging West Texas Intermediate crude futures down by one per cent.

Both benchmarks have surged in recent weeks, with Brent more than doubling after hitting a 21-year low below $16 in April, when USA crude turned negative.

The Organization of the Petroleum Exporting Countries and its allies led by Russian Federation, a group known as Opec+, are still debating when to hold their virtual ministerial meeting to discuss a possible extension of oil supply cuts.

OPEC+, encouraged by signs of recovery in the market, is considering extending the 9.7 million bpd cut beyond June.

With the date of the meeting not yet set and some calling for it to be early as this week, much remains up in the air, however.

But the demand picture is looking brighter as economies including China, the world's second-biggest oil consumer, start to recover from the pandemic.

"As virus-related lockdown measures continue to be lifted, we expect that demand will gradually recover", Capital Economics said in a report. But, with breakeven for shale oil producers around $50-$70 a barrel, this year's price collapse sent US output down by as much as 2 million bpd in April by some estimates.

This compared with 100.2 million bpd in 2019, it said, before the pandemic swept through Europe and the United States, evaporating demand for everything from flying to trips to the dentist.

Gasoline and distillate fuel stockpiles rose. That would mark the fourth straight weekly decline if US government data confirms the draw on Wednesday.

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