Oil prices have edged higher after the Opec cartel agreed to extend most of its significant production cuts into the third quarter of the year.
Brent crude, the international benchmark, rose by 0.3% to over $81 a barrel, while US-produced West Texas Intermediate increased by 0.3% to more than $77 a barrel.
The Saudi Energy Ministry announced that Opec’s production cuts will continue fully in the third quarter, with a gradual phase-out over the next 12 months.
Goldman Sachs analyst Daan Struyven noted that this decision initially led to a drop in prices following several days of declines, attributing it to the “gradual unwind reflecting a strong desire to restore production for several members.”
Kim Fustier, head of European oil and gas research at HSBC, commented, “How Opec+ unwinds its multiple, complex set of cuts – totalling 5.8 million barrels per day in aggregate – remains one of the biggest questions for the oil market.”
Bill Weatherburn, senior climate and commodities economist at Capital Economics, added, “The agreement by Opec+ to rollover voluntary production cuts for another quarter will, in our view, push the crude oil market into a sizeable deficit in Q3. Oil supply will be more constrained than we had expected, and we now forecast that the Brent oil price will end Q4 at $80 per barrel, up from our previous estimate of $75 per barrel.”
Gas prices have surged to their highest level in five months
Dutch front-month futures, the benchmark contract for European gas, soared over 11% today due to the unplanned shutdown at the Nyhamma processing site in Norway.
This outage caused gas flows to one of the UK’s six main gas terminals to plummet to zero. The terminal in Easington, East Yorkshire, handles a third of Britain’s total supply.
Gassco, the operator of the pipeline from Norway to Britain, reported that Equinor, the plant operator, is investigating the cause of the issue at the Norwegian facility.
Today’s sharp increase in prices, the steepest rise this year, has resulted in Europe’s benchmark contract climbing 18% in May to over €38 per megawatt hour, the highest level since December.
The UK’s equivalent contract rose by as much as 10.3%, marking the largest increase since October.
Ole Hansen, head of commodity strategy at Saxo Bank, commented, “The unplanned Norwegian outage is once again highlighting Europe’s dependency on imports.”
