Oil prices rose on with traders waiting to see whether major producers agree to extend their huge output cuts to shore up prices at a virtual meeting expected later this week.
Prices found support after news that the Organization of the Petroleum Exporting Countries and Russia, known as OPEC+, were moving closer to a compromise on extending oil output cuts and were discussing rolling over the curbs one to two months.
Brent has doubled over the past six weeks, thanks to supply cuts by the Organization of the Petroleum Exporting Countries and allies, including Russia, a grouping dubbed OPEC+.
Both Brent and WTI prices, however, are still down about 40% for the year so far.
Stockpiles at Cushing, Oklahoma, fell to 54.3 million barrels in the week to May 29, traders said, citing a Genscape report on Monday.
Bank of America said Monday it believed that North American oil shut-ins peaked in May.
“Oil prices have strengthened to levels where shutting-in no longer makes sense and should actually encourage producers to quickly restore production,” according to a BofA Global Research report.
Trade tension between China and the United States over Beijing’s security clampdown in Hong Kong, as well as manufacturing data on Monday showing Asian and European factories struggling, has kept a lid on gains.
Investors have turned more cautious, after China warned of retaliation on U.S. moves over Hong Kong.
China has asked its state-owned firms to halt purchases of soybeans and pork from the United States, two people familiar with the matter said, after Washington said it would eliminate special U.S. treatment for Hong Kong to punish Beijing.
“The possibility of heightened tensions does pose a risk for the recent rally in oil prices,” said Harry Tchilinguirian, head of commodity research at BNP Paribas.
Economic concerns and questions about fuel demand recovery also weighed on oil futures. Manufacturing data on Monday showed that Asian and European factories were struggling as government-imposed lockdowns tempered demand.
In Waf: Little trading or price movement occurred on Monday as faster buying earlier in the trading cycle lapsed into a lull.
Offers for West African grades, even ones which had recovered significantly in previous weeks, remained stuck at current levels.
BP last offered a cargo of Angolan Girassol at dated Brent plus $3.30.
Freight rates from the region to eastern markets hovered around the lowest levels since the outbreak of the coronavirus outside China in March.
Contango structure in the crude futures market also narrowed to the lowest levels since around the same time, limiting the incentive for buyers to snatch up and store physical crude.
Analysts and traders still predict the structure may last for months, making certain small draws on floating storage in China and Singapore an exception to the trend.
An Eastern customer said the abundance of supply, in the form of unsold crude for later delivery and oil already in floating storage provided more buying options.
Prices are as follows:
(1)Dated Brent =$35.46 /bbl (1.08)
(2)Bonny Light =$35.75/bbl (1.26)
(3)QuaIboe =$35.75/bbl (1.26)
(4)Forcados =$36.00/bbl (1.26)