Oil prices rise on talk of extended OPEC+ supply cuts

Investing.com-- Oil prices rose Thursday, recovering from near two-month lows, helped by talk of an extension of OPEC+ supply cuts.

At 08:20 ET (12:20 GMT), Brent oil futures rose 1% to $84.28 a barrel, after hitting a seven-week low on Wednesday, while West Texas Intermediate crude futures rose 0.9% to $79.73 a barrel.

OPEC+ to extend cuts?

OPEC and its allies could yet extend their voluntary oil output cuts of 2.2 million barrels per day beyond June, but Reuters reported Thursday, citing sources.

OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers, next meets at the start of June 1, and has yet to start formal talks, the news agency said, but the spurces indicated they could keep their cuts if demand fails to pick up.

The group has implemented a series of output cuts since late 2022 amid rising output from the United States and other non-member producers, and worries over demand as major economies grapple with high interest rates.

It is currently cutting output by 5.86 million barrels per day, equal to about 5.7% of global demand, but just over 2 million barrels per day of voluntary cuts by some members expire at the end of June.

Dollar drops as Fed downplays rate hike speculation

Oil prices were helped earlier Thursday by a drop in the dollar, with the greenback falling back from near six-month highs on Wednesday after Federal Reserve Chair Jerome Powell said the central bank’s next rate move will likely be a cut, although the timing of such a move remained uncertain.

Crude, like many commodities, is priced in dollars, and thus a weaker greenback benefits crude demand by making oil cheaper for international buyers.

Oil prices battered by US inventories, production spike

Crude markets are on course for hefty losses this week, after official data on Wednesday showed U.S. oil inventories grew a substantially bigger-than-expected 7.3 million barrels in the week to April 26. Gasoline stockpiles also grew, while distillates had a minimal draw.

The inventory reading, which was preceded by data showing U.S. production surged past 13 million barrels per day in March, ramped up bets that oil markets were not as tight as initially thought.

Such a scenario bodes poorly for oil prices.

Middling purchasing managers index readings from top importer China also weighed on oil prices this week.

Focus was also on ceasefire talks between Israel and Hamas, with any progress on that front lowering the risk premium attached to oil markets.

(Ambar Warrick contributed to this article.)

This article first appeared in Investing.com