Oil futures on Friday settled higher for the session, with U.S. prices up nearly 10% for the week as OPEC members and allies tightened the reins on output cuts and some signs of improvement in the global economy brightened the outlook for energy demand.
The Joint Ministerial Monitoring Committee, or JMMC, which monitors compliance with OPEC output quotas, held a gathering Thursday via videoconference, saying Iraq and Kazakhstan have already submitted “compensations schedules,” to make up for falling short of their pledges to reduce output. Other “underperforming participants” will have until June 22 to submit their plans to compensate for production above their targeted levels.
The OPEC+ decision “helped renew confidence that members will further cut production to comply with the 9.7 million [barrel per day] agreement,” said Paola Rodriguez Masiu, senior oil markets analyst at Rystad Energy. The cuts officially kicked in at the start of May and were extended to run through July.
“The compliance level has already been higher than most of the market participants expected and it seems that a better level is achievable,” she said in emailed commentary. OPEC+ pegged compliance with the cuts at 87% in May.
Complying with the full 9.7 million barrels per day in cuts “means shutting another million barrels of daily production,” said Masiu. “That’s not negligible and it is definitely a boost factor for prices.”
West Texas Intermediate crude for July delivery
the U.S. benchmark, climbed 91 cents, or 2.3%, to settle at $39.75 a barrel on the New York Mercantile Exchange after tapping a high of $40.50. Front-month contract prices logged their highest finish since March 6, according to Dow Jones Market Data. For the week, they rose 9.6%.
Global benchmark Brent oil for August delivery
added 68 cents, or 1.6%, at $42.19 a barrel on ICE Futures Europe, for a weekly advance of 8.9%.
Commodity analysts also said that renewed talks about a recovery fund to help Europe’s troubled economies and easing Sino-American relations were helping to lift the outlook for crude demand.
European Union leaders relaunched negotiations on Friday over a €750 billion ($840 billion) recovery fund to revive the eurozone but divisions remain.
“The EU 750-billion-euro recovery fund will support the economic recovery in Europe and help the prospects for stronger crude demand later this summer,” wrote Edward Moya, senior market analyst at Oanda, in a daily research note.
A report that China-U.S. trade tensions might be easing also helped to boost crude prices. Bloomberg News reported that China will increase buying of U.S. soybeans, corn and ethanol in line with a phase one trade deal struck at the start of this year.
“Globalization is also important for crude demand and if…