London — Brent oil rose to above $42 a barrel on Friday, adding to gains in the previous session, after OPEC producers and allies promised to meet supply cuts and on signs of demand, hit by the coronavirus crisis, recovering.
Iraq and Kazakhstan, during a meeting of an OPEC+ panel on Thursday, pledged to comply better with oil cuts, sources said. This means curbs by the Organization of Petroleum Exporting Countries and allies, known as OPEC+, could deepen in July.
“There is enthusiasm in the market that oil supply is still under control,” said Paola Rodriguez Masiu, analyst at Rystad Energy. “A positive OPEC+ meeting does that and yesterday’s session helped renew confidence.”
Brent crude LCOc1 was up $1.00, or 2.4%, at $42.51 by 1332 GMT after hitting $42.89, its highest since June 8. U.S. West Texas Intermediate (WTI) crude CLc1 climbed $1.32, or 3.4%, to $40.16.
“The key takeaway is that OPEC+ compliance will improve in the coming months,” said Stephen Brennock of broker PVM.
Both contracts rose about 2% on Thursday and are heading for weekly gains of more than 9%.
Brent has more than doubled since hitting a 21-year low in April, helped by record OPEC+ supply cuts of 9.7 million barrels per day (bpd), or 10% of world demand, and an easing of government lockdowns imposed to control the coronavirus.
Fuel demand in Europe is staging a gradual recovery after the height of the lockdowns in April but remains well below normal, data from several countries shows.
In a further sign of market recovery, Brent on Thursday moved into backwardation, where oil for immediate delivery costs more than supply later, for the first time since March.
A premium for oil for immediate delivery usually indicates tightening supply and encourages storage to be drawn down.
U.S. crude stocks hit another record this week, but fuel inventories fell.