Oil prices rose on Monday with hopes that the OPEC+ production cuts will increase amid the coronavirus pandemic to sustain price pressure.
International benchmark Brent crude was trading at $43.30 per barrel at 0738 GMT on Monday with a 1.22% increase after closing Friday at $42.78 a barrel.
American benchmark West Texas Intermediate (WTI) was at $40.73 per barrel at the same time for a 1.49% increase after ending the previous session at $40.13 a barrel.
Oil markets started the week on an optimistic upswing, with hopes that OPEC+ will keep the current production cuts, as global demand remains week amid increasing coronavirus cases.
The OPEC+ group, which has curbed output since January 2017 to support prices, is now reducing production by 7.7 million barrels per day (b/d), down from cuts totaling 9.7 million b/d imposed from May 1 to Aug. 1. The group is due to pare that further by 2 million b/d starting from next year.
The signs of economic rebounds in China and Japan, which are considered the second and third-largest economies in the world, also support the increase in prices.
However, concerns that weak oil demand will continue as the number of coronavirus cases worldwide has now reached over 54.3 million is exerting pressure on oil prices.
According to data from Johns Hopkins University on Monday, the US, the world’s largest oil-consuming country, still tops the number of cases above 11 million, while cases in India now total over 8.8 million, and Brazil follows with over 5.8 million cases.
After the removal of the force majeure on its oil facilities and ports, Libya has increased its oil production to 1 million barrels per day, fueling concerns of a supply glut and limiting further price rises.
Political risk and oil analyst Jose Chalhoub said the International Energy Agency (IEA) downplayed the euphoria of a coronavirus vaccine and instead stressed the lack of demand after last week’s short-lived 12% jump in oil prices.
Chalhoub said the supply glut and weak demand crisis would continue as long as pandemic-related lockdowns and restrictions remain on the table.
In its monthly oil report released last week, the IEA said “vaccines are unlikely to significantly boost demand until well into next year.”