Saudi Arabia and Russia push for an extension to output cuts, with OPEC+

Some of the world’s most powerful oil producers had been expected to convene on Thursday, with energy market participants closely monitoring whether the influential group will officially agree to extend their deepest ever round of output cuts.

OPEC kingpin Saudi Arabia and non-OPEC leader Russia were thought to support a one-month extension of the current level of supply cuts, Reuters reported on Wednesday, citing unnamed OPEC sources.

However, the date of a virtual meeting to finalize an agreement was still unclear on Thursday afternoon.

OPEC and non-OPEC allies, sometimes referred to as OPEC+, were originally scheduled to review their production cuts on June 9-10.

Late last month, Algeria, which currently holds the rotating OPEC presidency, proposed this meeting should be brought forward to Thursday.

An OPEC+ meeting was still possible this week, according to Reuters, citing unnamed OPEC sources, if Iraq and other non-complying members promised to deepen their production cuts.

Brent crude futures traded at $39.50 a barrel during early afternoon deals, down more than 0.6%. The international benchmark rose above $40 a barrel for the first time since March 6 in the previous session, before erasing those gains amid OPEC+ uncertainty.

U.S. West Texas Intermediate (WTI) crude futures stood at $36.78 a barrel, almost 1.4% lower. The contract also climbed to its highest level since early March on Wednesday.

Oil prices have marched higher in recent weeks, recovering from a dramatic fall in April which saw Brent futures hover close to 20-year lows and WTI tumble into negative territory for the first time in history.

It comes amid optimism about an economic recovery in China, the world’s second-largest economy, and as other countries across the globe seek to gradually lift coronavirus lockdown measures.

Martijn Rats, chief oil analyst at Morgan Stanley, told CNBC’s “Squawk Box Europe” on Thursday that oil supply had adjusted “very, very quickly” in order to help the market rebalance.

“A lot of that supply side adjustment has come from OPEC, so if OPEC were to unwind these cuts, release more barrels to the market, we could very quickly end up back in a much weaker situation,” Rats said.

“We know prices can go exceedingly low in that weak situation, so from that perspective it is important that OPEC represents a relatively cohesive and united front,” he continued. “Quite often, with these production agreements, if only one or two or three of the players start to deviate then it has this habit of sort of falling apart altogether. So it is important that OPEC continues to exhibit a degree of cohesion.”

In April, OPEC+ agreed to a cut oil production by a record 9.7 million barrels per day (b/d). The move was designed to prop up prices as the coronavirus pandemic led to an unprecedented collapse in oil demand.

The production cuts…