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Crude oil prices finished with a weekly gain of about 10% on Friday, as the sudden drop in U.S. production output of crude oil, along with OPEC output cuts, offers hope that the oil glut in the market will reduce significantly.
International benchmark, Brent crude closed at $42.20 for a 9.5% weekly gain, after it opened on Monday at $38.80 a barrel. West Texas Intermediate (WTI) also finished the week on a good note, as it closed at $39.98 a barrel with an 11% weekly increase, after starting the week at $36.03 per barrel.
Crude oil received an unusual catalyst from OPEC and its major allies who complied with the production cut agreement, though some oil traders and experts warned that the bullish momentum might run out of steam.
Understanding Brent Crude: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of about two-thirds of the world’s traded crude oil, including Nigeria’s crude.
However, major oil producers guilty of overproducing, which include Nigeria and Angola, will need to submit plans for compliance with the production cut agreement by June 22, according to the Joint Ministerial Monitoring Committee tasked with monitoring the OPEC+ production cut accord.
A prolonged rally above the $40 level “will be difficult for WTI crude as restrictions are not going away anytime soon… so oil prices at best might have another dollar or two to climb higher,” said Edward Moya at Oanda. Meanwhile, oil traders have flagged the start of hurricane season as a potential headwind for crude oil prices.