Oil prices surged to the highest level in more than two years on Tuesday, as investors awaited a meeting of the Organization of the Petroleum Exporting Countries and its allies that will decide on production levels.
West Texas Intermediate crude for July delivery
CLN21,
The August Brent contract
BRNQ21,
All eyes were on Tuesday’s virtual meeting of major oil producers. “The producers agreed back in April to add around 2 million barrels a day by July, a commitment they are expected to stick to,” said Marios Hadjikyriacos, investment analyst at XM.com, to clients in a note.
“Oil prices are trading higher since that announcement, which will only make them more confident that the market can absorb some targeted production increases. The reaction today will depend mainly on what they signal about future supply increases, beyond what’s already been agreed,” Hadjikyriacos added.
The “oil accumulated during the pandemic months is almost gone, and the second half of the year could see a sharp decline in oil reserves according to OPEC’s latest forecast, a decline that would comfortably surpass the 2021 average and create the need for extra oil pumping,” noted Ipek Ozkardeskaya, senior analyst at Swissquote.
The analyst said the end of COVID-19 lockdown measures and increased economic activity, plus improved prospects for global travel, should boost global oil demand.