Oil prices climb as faith in supply cuts grows

Oil prices climb as faith in supply cuts grows

Oil prices rose on Tuesday, supported by growing confidence that producers are following through on commitments to chop crude supplies while fuel demand picks up with more cars back on the road as coronavirus lockdowns ease.

Brent crude futures were up nearly 1.4%, or 50 cents to $36.03 a barrel as of 0840 GMT.

U.S. West Texas Intermediate (WTI) crude futures was up 2.6%, or 86 cents, at $34.11 a barrel. There was no WTI settlement on Monday due to the U.S. Memorial Day holiday.

The market was buoyed by comments from Russia that its oil output had dropped almost to its target of 8.5 million barrels per day (bpd) for May and June under the availability cut deal agreed by major producers (OPEC+).

OPEC+ countries are set to satisfy again in early June to debate maintaining their supply cuts to prop up prices, which are still down about 45% since the beginning of the year.

The world's major producers, including Saudi Arabia and Russia, agreed in April to chop their collective output by nearly 10 million bpd for May and June.

Russia's energy ministry on Monday quoted minister Alexander Novak as saying an increase in fuel demand should help cut a worldwide surplus of about 7 million to 12 million bpd by June or July.

"Russia is clearly committed to continued cuts also in H2-20 therefore the upcoming OPEC+ meeting on the 9th of June is unlikely to be a bearish surprise just like the one that fell apart on the 6th of March," SEB chief commodities strategist Bjarne Schieldrop said.

Data from energy services firm Baker Hughes, meanwhile, showed the U.S. rig count hit a record low of 318 within the week to May 22, also indicating lower output within the future.