Crude oil prices soared higher on the first trading session of the week. This is as Iraq, a leading OPEC member, disclosed that it would reduce its oil production. More so, U.S. President Donald Trump has taken executive action on the provision of economic aid to Americans hit by the COVID-19 pandemic, thereby reigniting hopes among crude oil traders for a recovery in energy demand.
The West Texas Intermediate gained 1.26% to $41.71. Brent Crude was also up 0.95% to $44.82 at the time this report was drafted.
Iraq, the second-largest OPEC member (in terms of production capacity) disclosed that it would increase its production cuts to compensate for failing to comply with a deal earlier made in April 2020 to curb crude oil production.
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Insight: In an explanatory note to Nairametrics, Stephen Innes, the Chief Global Market Strategist at AxiCorp, spoke about the macros that crude oil is presently focused on. He said:
“Oil remains in a relatively tight trading range with upside capped by concerns about the pace of the post-COVID-19 macro recovery and rising OPEC+ and US supply.
“Oil markets traded softer into the weekend on the back of escalating US-China tensions. Although prices bounced favorably on the US employment data, they were unable to hold on to their gains given the geopolitical overhang.”
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Still, crude oil markets continue to test the upper bound of its recent trading range, supported by OPEC’s unwavering compliance commitment which was reaffirmed when Saudi Arabia and Iraq’s energy ministers made a joint statement saying that they were fully committed to the OPEC+ oil production agreement.