Global oil prices gain on Tuesday following the news of OPEC planning to extend production cuts and work on a viable exit strategy.
Brent crude oil gained 0.52 percent to $57.57 a barrel at 03:03 p.m. Nigerian time. While the West Texas Intermediate oil rose 0.77 percent to $52.30 a barrel, up from 38 cents.
In the past, traders have criticized the cartel for not having an exit strategy for its aggressive production cuts. Rather, hoping global demand would increase in the long run and eventually absorb supplies.
“The market will probably take it positively if OPEC can explain their thinking on how it works when they’re not voluntarily holding back oil from the market anymore,” said Torbjorn Kjus, an analyst at DNB Markets. “There’s a fear in the market that when the deal runs out, then it’s every man for himself again, and that’s not what they’re thinking.”
Last week, OPEC Secretary-General Mohammad Barkindo said balanced oil market is in sight and that production cuts have reduced half the oil-inventory surplus.
“A balanced oil market is now fully in sight,” Barkindo said at the Oil & Money conference in London on Thursday. “Stability is steadily returning and there is far more light at the end of the dark tunnel we have been traveling down for the past three years.”
U.S. inventories dropped by 3 million barrels last week, making it a fifth consecutive decline, according to a survey published by Bloomberg before government data due Wednesday.
“The oil inventory surplus in industrialized nations compared with the five-year average has fallen below 160 million barrels, less than half the level at the start of the year, he said. Stronger demand means that decline has accelerated since May,” Barkindo said.