Brent crude futures, the global benchmark, rose above $42 per barrel for the first time since early March on Friday. Prices have gained more than 18% this week. West Texas Intermediate, the US benchmark, increased to more than $39 per barrel.
OPEC will meet on Saturday to discuss extending output cuts by one month, two OPEC sources confirmed to CNN Business.
But Bjornar Tonhaugen, head of oil markets at Rystad Energy, notes that oil producers are still managing a tough balancing act, preventing them from backing off too soon. Countries like Saudi Arabia want to keep whittling down what’s in storage facilities, helping prices rise to a more sustainable level before reversing course, he said.
“Even if demand exceeds supply for a while, that does not mean that we really have a problem,” Tonhaugen told clients Friday.
Investors, however, see the situation improving from here on out, and are now mostly focused on what will happen in August. Craig Erlam, senior market analyst at Oanda, thinks output will likely be able to increase again at that point.
“With people leaving their houses, returning to work — maybe even avoiding public transport in favor of [cars] — and borders reopening, record supply cuts won’t have to last much longer to sustain these prices,” he said.
Still, risks remain. Another wave of coronavirus infections could hit demand at a crucial moment. And it’s hard to say definitively that people will return to old habits as quickly as expected.
— John Defterios, Chris Liakos and Mary Ilyushina contributed reporting.