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Oil rises in expectation of new OPEC production cuts

US, WASHINGTON (NEWS OBSERVATORY) — Oil prices jumped on Wednesday in the hope that the largest producers of this fuel have made progress on agreeing to increase production cuts in response to lower demand due to the coronavirus epidemic.

Futures on Brent rose by 1.12% to $ 52.44 per barrel at 09:40 UTC.

Futures for US light WTI crude oil rose 1.23% to $ 47.76 per barrel.

On Tuesday, Brent fell 4 cents, while WTI has risen in price for the third session in a row. At the same time, both reference marks fell by about 27% from January peaks.

The day before, the OPEC + technical committee recommended a reduction in oil production by another 1 million barrels per day. Last month, the technical committee recommended a less significant decrease – by 600,000 barrels per day. The new recommendation may mean that Russia and Saudi Arabia, the two largest oil producers at OPEC +, are close to closing a deal to support prices.

Currently, OPEC + countries have already reduced production by 1.7 million barrels per day, plus Saudi Arabia voluntarily reduced production by another 400,000 barrels per day.

The official OPEC + meeting in Vienna will be held on March 5-6.

“Now OPEC + does not have time for caution. The excess supply in the second quarter required serious efforts on the part of the group to compensate for it before the outbreak of COVID-19 (coronavirus), but now it is a necessity, ”Barclays analysts said in a statement.

In turn, Goldman Sachs analysts note that a decrease in production by 1 million barrels per day is not enough to cover the expected reduction in demand by 2.1 million barrels per day in the first half of the year.

The bank again worsened its April forecast for Brent crude oil prices in April to $ 45 per barrel, although it expects recovery to $ 60 per barrel by the end of the year.

Meanwhile, the American Petroleum Institute (API) said Tuesday that US oil inventories for the week ended February 28 were up 1.7 million barrels, with analysts expecting growth of 2.6 million barrels.

Official stock data from the US Energy Information Administration will be released on Wednesday.

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