Oil prices edged higher on Tuesday as OPEC+ was expected to stick to existing plans to boost oil output slightly from May 1, suggesting it does not see a lasting impact on demand from India’s coronavirus crisis. This is good news for Nigeria as increase in crude oil price will boost government revenue and add to the nation’s dwindling foreign reserve. The group has also ditched plans to hold a full ministerial meeting on Wednesday, sources said. A technical meeting on Monday had voiced concern about surging COVID-19 cases but kept its oil demand forecast unchanged.
Brent crude was up 24 cents, or 0.4%, at $65.89 a barrel after climbing to a session high of $66.45. U.S. oil gained 45 cents, or 0.7%, to $62.36.
“Traders do not want to miss out on a potential bullish OPEC+ meeting so a limited optimism is reflected in prices,” said Bjornar Tonhaugen of Rystad Energy. The producer group known as OPEC+ is set to slightly ease oil output cuts from May 1, under a plan agreed before the coronavirus surge in India. Russian Deputy Prime Minister Alexander Novak said on Tuesday the situation on the oil market was “positive and oil demand was recovering”, although the rapid spread of the coronavirus in India and Latin America was a concern.
India, the world’s third-largest crude importer, has recorded a daily rise of more than 300,000 cases for several days. It has also reported a total of almost 200,000 deaths. “The possibility that increasing OPEC+ production could be intersecting with weakening Asian oil demand suggests a possible end to the reduction in the global oil supply surplus that has been supporting the complex during the past year,” said Jim Ritterbusch, president of Ritterbusch and Associates. Record OPEC+ supply cuts last year helped to drive a recovery in prices from historic lows. Most of the curbs are still in place, even after the plan to raise output slightly from May.
“With only a modest production increase outside of OPEC+, and OPEC+ pursuing a cautious approach, we expect the oil market to be undersupplied by 1.5 million barrels per day this year and forecast Brent will reach $75 a barrel in the second half of this year,” UBS GWM analyst Giovanni Staunovo said. In another development that could eventually add supply to the market, talks in Vienna aimed at reviving the 2015 Iran nuclear accord were set to resume on Tuesday. Also in focus this week will be the latest U.S. oil inventory reports, which analysts expect will show a rise in crude stocks. The first report, from the American Petroleum Institute, is due at 2030 GMT on Tuesday.