Crude oil futures made a recovery in morning trading in Europe Friday, following news reports that the US may postpone tariffs on Mexico and amid ongoing supply worries. At 1053 GMT, August ICE Brent was up 70 cents from Thursday’s settle to $62.37/b and the NYMEX July light sweet crude contract had risen 59 cents to $53.18/b.
“Prices are still reacting to news updates from Washington as investors remain nervous about ongoing Trump rhetoric with China and Mexico,” said Mihir Kapadia, CEO of investment management firm Sun Global Investments. “Supply has also been tightened with Venezuela and Iran on US sanctions,” Kapadia added. There was supportive sentiment from Saudi Arabia. OPEC is ready to commit to an extension of its oil production cuts beyond June, Saudi energy minister Khalid al-Falih said Friday, but non-OPEC partners, led by Russia, could see their quotas eased.
“I don’t think I’d be giving away a secret if I said that on the OPEC side, the rollover [of the production cut deal] is almost in the bag,” Falih said at the St Petersburg International Economic Forum, after meeting with Russian counterpart Alexander Novak. “The question is to calibrate with non-OPEC if there needs to be an adjustment.” Commerzbank analysts said they were “convinced that OPEC and Russia will do everything in their power to prevent an oversupply and to ensure higher prices.”
OPEC and 10 non-OPEC allies, led by Russia, agreed in December 2018 to cut a combined 1.2 million b/d in supplies through June to drain a glut of oil inventories and bolster prices, which had slumped majorly in the fourth quarter of 2018. Since then, fears of a global economic chill due to US-China trade tensions have overshadowed concerns of a supply risk due to US sanctions on Iran and Venezuela, with front-month ICE Brent futures dropping some 20% in the last four weeks.