Oil prices back on the rise on US stimulus hopes, Iraq output cut

Output cuts by Iraq will take its total reduction to 1.25 million bpd this month and next.
By : Reuters
| Updated on: 10 Aug 2020, 09:48 AM
FILE PHOTO: Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area where Tidelands Oil Production Company operates near Long Beach, California (Representational photo) (REUTERS)
FILE PHOTO: Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area where Tidelands Oil Production Company operates near Long Beach, California (Representational photo) (REUTERS)
FILE PHOTO: Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area where Tidelands Oil Production Company operates near Long Beach, California (Representational photo) (REUTERS)
FILE PHOTO: Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area where Tidelands Oil Production Company operates near Long Beach, California (Representational photo)

Oil prices climbed in early trade on Monday, clawing back over half of Friday's losses, on hopes for a stimulus deal to shore up the US economic recovery and a pledge from Iraq to deepen its crude oil supply cuts.

US West Texas Intermediate (WTI) crude futures rose 49 cents, or 1.2%, to $41.71 a barrel at 0010 GMT, while Brent crude futures were up 40 cents, or 0.9%, at $44.80 a barrel.

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While both benchmark contracts fell on Friday, hurt by demand concerns, Brent ended the week up 2.5%, with WTI up 2.4%.

Hopes grew on Sunday that a stand-off would end between US Democrats and the White House on a new support package for cash-strapped US states hit by the coronavirus pandemic.

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(Also read: Oil drilling drops to 15-year low in US with shale in full retreat)

US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both said they were willing to restart talks on a deal to cover the rest of 2020.

At the same time, Saudi Arabian Aramco's Chief Executive Amin Nasser said he sees oil demand rebounding in Asia as economies gradually open up after the easing of coronavirus lockdowns.

"There's a small undercurrent of positivity this morning emanating from comments by Saudi Aramco who are seeing a recovery in demand," said AxiCorp market strategist Stephen Innes.

On the supply side, Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months. The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and their allies, together called OPEC+.

(Also read: End game for oil? OPEC prepares for an age of dwindling)

The sharper cut will take Iraq's total reduction to 1.25 million bpd this month and next.

"Saudi Arabia and Iraq forging better relationships over the oil deal are excellent for the compliance outlook," Innes said.

The Saudi and Iraqi energy ministers said in a joint statement that OPEC+ efforts would improve the stability of global oil markets, accelerate its balancing and send positive signals to the markets.

First Published Date: 10 Aug 2020, 09:48 AM IST
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