Crude Oil Sustains Bullish Run Above $40 Per Barrel on Tighter Supply

Crude Oil Rose Above $40 as Global Supply Drops on OPEC Plus Accord

Global oil prices sustained bullish run on Monday as global supply remains contained on OPEC plus production cuts.

Brent crude oil, against which Nigerian oil is priced, rose to $42.22 per barrel during the London trading session on Monday.

US West Texas Intermediate (WTI) grew from $37 per barrel it traded on Thursday to $39.85 per barrel as more firms in the world’s largest economy shut down oil rigs.

The Organisation of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC Plus, had agreed to reduce crude oil production by 9.7 million barrels per day up until July. However, the accord was impacted by poor compliance from member states that are struggling to mitigate the negative impact of COVID-19 and ease economic challenges due to the drop in revenue generation.

Last week, member states of OPEC plus finally agreed to comply with the accord and also agreed that any member that fails to comply will have to cut extra the following month to make up for the deficit.

Also, a recent report shows the cartel and allies attained a 87 percent compliance level in May against the general market perception of a lower number. This new detail bolstered oil prices and continued to sustain prices above the $40 per barrel.

This was possible because of the reopening of economies and the increase in global activities in the energy sector.

Uncertainty, however, remains especially with the latest information by the World Health Organisation that new cases of coronavirus jumped in recent weeks.

“The potential economic damage of a new round of COVID-19 countermeasures will likely contain any investor enthusiasm,” said Michael McCarthy, chief market strategist at CMC Markets.