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Oil prices rise amid expectations of production cuts extension

According to closing market prices on Tuesday, one barrel of Brent crude, the international benchmark, was priced at $64.52 while American benchmark West Texas Intermediate (WTI) was trading at $60.89 per barrel.

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Oil prices are continuing to rise mainly due to expectations regarding that major oil producers of OPEC+ would keep to the decision to cut oil output in May. Analysts comment that OPEC+ member states have intentions to extend cuts into May because of the possible decrease in demand amid new COVID-19 lockdowns being implemented in many countries. The OPEC+ members will meet on Thursday to take a decision whether to keep the current cuts or ease them after April.

OPEC Secretary-General Mohammad Barkindo made a statement on the issue, highlighting “the need to remain very cautious and attentive to changing market conditions.” Barkindo’s statement strengthened current expectations. Emphasizing on the positive developments which occurred last month, the Secretary-General also reminded that uncertainties and fragility brought by the COVID-19 pandemic are still valid.

Currently, OPEC and OPEC+ members are producing 7.9 million barrels per day (bpd) less within the framework of the existing deal. Among them, Saudi Arabia is voluntarily applying extra cuts of 1 million bpd. Speaking on the issue, a source familiar with the matter, said that Saudi Arabia is supporting the extension of oil cuts into May and June and is considering to extend its voluntary cuts to boost oil prices. “They don’t see demand as yet strong enough and want to prevent prices from falling,” the source said.

On March 4, OPEC+ had decided to keep current outputs steady, while allowing Russia and Kazakhstan to conduct a modest raise in production. However, Russia is supporting the extension of oil cuts while seeking a new privilege for itself, a source familiar with the Russian approach on the issue stated.

It is stated that Iran’s increase of crude exports is another reason for possible extension decision. Although, Iran has been under US sanctions, the country was able to increase its shipments in recent months which is the situation that has pressured oil prices downward.

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