Oil prices rose above $57 on Tuesday, WTI crude was up by 2.45 percent at $54.85 , after hitting $55 earlier in the day , while Brent crude traded 2.32percent at $57.65.
The gains improved from Monday, extending to Tuesday, amid expectation that oil production would be curbed by the Organization of the Petroleum Exporting Countries (OPEC), and that top producing oil country, Saudi Arabia would tighten the market. Saudi revealed that oil production would be reduced by an additional 1 million barrels by day (bpd) beyond its quota in the OPEC.
Nevertheless, production cut quotas allocated to all members of OPEC, and 500,000bpd were complied completely by producers.
Russia, the leader of the non OPEC group in the ‘OPEC and its allies (OPEC +) pact stayed in line with the agreement on reduced production of 125,000bpd, and its output increased in January. According to Reuters estimates, Russia oil production rose last months to 120,000 bpd .
However, future curves continue to move into backwardation. The state of the market that points to tighten supplies with the price of the nearer future contracts higher than those further out in time.
The Secretary General of OPEC, Muhammad Barkindo was pleased with the backwardation at the opening of the OPEC + panel meeting on tuesday.
Barkindo said, “With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand.”
Ijeoma Njoku reporting, Obinwannem News
