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US Crude Soars 8% As OPEC Reaches Agreement

April 9, 2020 at 15:03 by Andrew Moran

Crude oil futures are soaring at the end of the holiday-shortened trading week after the Organization of the Petroleum Exporting Countries (OPEC) reached an agreement to slash output levels. Global financial markets paid close attention to the meeting because it would have either sparked a huge rally or sent crude prices crashing. With US output falling and OPEC and its allies cutting production, could oil rebound to $40 this month?

June West Texas Intermediate (WTI) crude oil futures surged $2.17, or 7.19%, to $32.34 per barrel at 14:51 GMT on Thursday on the New York Mercantile Exchange. Crude prices are poised for a huge weekly gain of 20%, paring their year-to-date losses to 45%.

Brent, the international benchmark, is also posting a big jump to close out the trading week. June Brent crude futures climbed $2.53, or 7.7%, to $35.37 a barrel on London’s ICE Futures exchange. Brent is also on track to settle the week 20% higher. YTD, Brent is still down 46%.

Crude markets soared on Thursday after it was widely reported that Saudi Arabia and Russia reached a deal that would reduce production levels by as much as 20 million barrels per day (bpd). OPEC has not officially announced the move because sources tell Reuters that key details are still being fine-tuned, such as how the cuts will be divided and how long the cuts will be in place.

OPEC and allies – OPEC+ – held a virtual meeting on Thursday after canceling Monday’s scheduled event. The world’s largest producers negotiated how to navigate the market with the coronavirus pandemic decreasing international demand.

Analysts agree, however, that the deal will not significantly raise prices. It remains uncertain when the global economy will open up and if demand will return to normal levels this year. Plus, global markets are still oversupplied and it would take time before inventories adapt to market conditions.

On Wednesday, the US government revealed that domestic producers reduced output by 600,000 barrels per day (bpd), bringing down output to under 13 million bpd.

In other energy commodities, May natural gas futures picked up $0.01, or 0.48%, to $1.791 per million British thermal units (btu). May gasoline futures soared $0.0667, or 9.76%, to $0.744 a gallon. May heating oil futures tacked on $0.04, or 3.88%, to $1.05 per gallon.

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