Oil markets pushed higher Friday, amid expectations major oil producers will meet over the weekend to discuss extending record production cuts.
At 4 AM ET (0800 GMT), U.S. crude futures traded 1.7% higher at $38.06 a barrel. The international benchmark Brent contract rose 2.4% to $40.94.
Earlier Friday, the Russian energy ministry confirmed that a video conference of a group of leading oil producers, known as OPEC+, would be held on Saturday. There had been doubts that this meeting would occur amid disputes about quota busting by various members of the group, notably Iraq.
However, the announcement from the Russian ministry suggests a deal has been reached about better compliance with quotas, paving the way for a meeting over the weekend to extend the current output cuts by another month.
Oil prices have soared over the past month, thanks to promises of record supply cuts of 9.7 million barrels a day by the OPEC+ members.
“Saudi Arabia and Russia were not willing to extend deeper cuts if others continue to produce above their agreed quotas,” noted analysts at ING, in a note to clients. “However, for what it’s worth, the key culprit, Iraq has said that it will improve its compliance in the coming months. Any deal will likely be subject to better compliance from those who have fallen short so far.”
Without a new deal, OPEC+ is set to taper its cuts to 7.7 million barrels a day from July 1, from 9.7 million barrels a day in June and May.
Still, it’s not only OPEC+ members who have been cutting output to try and boost prices. The sharp drop in the price of oil earlier this year, when the coronavirus resulted in many economies shutting down, made it unprofitable for many of the U.S. shale drillers to continue operating. The Energy Information Administration estimates that U.S. output had fallen from over 13.2 million barrels a day at its peak to less than 11.5 million barrels a day by late May.
Later Friday, Baker Hughes will report the number of active U.S. rigs drilling for oil. Last week this number declined by 15 to 222, dropping for 11 weeks in a row, suggesting further declines in domestic crude output.