UAE Says OPEC+ Deal Will Soon Restore Oil Prices to ‘Normal’

UAE Says OPEC+ Deal Will Soon Restore Oil Prices to ‘Normal’”

Brent crude rose 77 cents, or 1.94 per cent, at $40.49 a barrel by 0918 GMT. But some observers said they didn't expect to see any return to the stringent lockdowns seen at the start of the year.

Elsewhere US shale producers are also cutting back on drilling amid the collapse in demand for oil.

Oil-production limits adopted by a group of major crude suppliers will soon bring prices back to "normal", according to the oil minister from the United Arab Emirates.

The global energy watchdog has forecast that the world's daily oil demand may climb by 5.7m barrels next year, the fastest annual climb on record, to an average of 97m barrels of oil a day in 2021.

The IEA said oil demand in the second quarter, which saw the greatest impact from lockdown measures, was 17.8 million barrels per day lower when compared to the same period a year ago. That level of demand reduction was slightly less than the group had previously expected, although still unprecedented.

The threat of a protracted recovery may put pressure on OPEC and its allies to cap production throughout 2020, and the group may take further steps to rebalance the energy market as the most recent Monthly Oil Market Report (MOMR) warns that "in 2020, world oil demand growth isadjusted lower by 2.23 mb/d and is now forecast to drop by 9.07 mb/d".

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Iraq, which has had trouble keeping up with cuts it agreed on with other key crude exporters, known as OPEC+, has reportedly asked BP to reduce production at its supergiant oil deposit so as not to miss the target level again.

The price of oil pulls back from the monthly high ($40.44) even though the Organization of the Petroleum Exporting Countries (OPEC) agree to extend the production cuts unveiled at the April meeting, but the ongoing contraction in U.S. production may keep crude prices afloat as output narrows for ten consecutive weeks.

"All these three things coming together tells us that the gradual recovery of the oil market continues", he added.

But concerns about a second wave of lockdowns from rising infection rates weighed on the market.

For a look at all of today's economic events, check out our economic calendar.

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