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Oil prices rose on Tuesday in line with firmer financial markets and bolstered by expectations that producer group OPEC and its allies will keep withholding supply.
Front-month Brent crude futures were at $62.56 at 0707 GMT, up 27 cents, or 0.4 per cent, from Monday's close. US West Texas Intermediate (WTI) crude futures were at $53.75 per barrel, 49 cents, or 0.9 per cent, above their last settlement.
Prices fell by around 1 per cent in the previous session and crude futures are down by some 20 per cent from their 2019 peaks in late April, dragged lower by a widespread economic downturn that has started to impact oil consumption.
Traders said crude oil futures on Tuesday were pushed up by a broader lift in financial markets after Beijing eased financing rules to stem an economic downturn.
On the production side, Russia said on Monday it might support an extension of supply cuts that have been in place since January, warning oil prices could fall as low as $30 per barrel if producers supply too much crude.
The Organisation of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.
OPEC+ is due to meet in late June or early July to decide output policy for the rest of the year.
“It seems likely that OPEC will roll over the current supply cuts at the next meeting,” said Callum MacPherson, head of commodities at investment bank Investec.
Despite this, MacPherson said “there is a limit to how much longer it (OPEC+) can continue to avoid addressing the serious challenge of being squeezed out by growing US production”.
US crude output has risen by 1.6 million barrels per day (bpd) over the past year, to a record of 12.4 million bpd, making the US the world's biggest oil producer ahead of Russia and Saudi Arabia.
On the demand side, analysts expect fuel consumption growth to stutter along with the global economy.
Energy consultancy FGE said global crude oil demand growth could drop below 1 million barrels per day (bpd) in 2019, down from previous expectations of 1.3 to 1.4 million bpd.
“This effectively gives us an extra 300,000-400,000 barrels per day of supply,” said FGE Chairman Fereidun Fesharaki.
This revision comes on the back of concerns about the health of the global economy.
“With China slowing, the EU sickly and the US data starting to wobble, an economic downturn remains a clear and present danger,” said Stephen Innes, managing partner at Vanguard Markets.
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