Oil climbs for third straight week, buoyed by producers holding back output

MELBOURNE: Oil prices rose in early trade on Friday, on track for a third straight week of gains, buoyed by major oil producers’ efforts to hold back output amid concerns about the economic recovery from the coronavirus pandemic.

U.S. West Texas Intermediate (WTI) crude futures inched up 8 cents, or 0.2%, to $42.90 at 0158 GMT, on course for a 2% rise for the week.

Brent crude futures rose 16 cents, or 0.4%, to $44.07, heading for a weekly rise around 0.5%.

Both benchmark contracts fell around 1% on Thursday on economic concerns after weekly U.S. jobless claims came in higher than expected.

Meanwhile, an internal report by the Organization of the Petroleum Exporting Countries and allies, showed the group known as OPEC+ was focused on ensuring that members who had overproduced against their commitments would cut their output, as flagged following an OPEC+ meeting on Wednesday.

Reuters reported that OPEC+ found some members would need to slash output by 2.31 million barrels per day to make up for their recent oversupply.

“They’re really focusing on the compliance from OPEC members. They’ve called out Iraq and Nigeria for not complying. That’s all been very good for supporting prices,” said Louis Crous, chief investment officer at BetaShares Capital, an exchange-traded fund provider in Australia.

The internal report flagged demand risks, showing OPEC+ expects oil demand in 2020 to fall by 9.1 million bpd, 100,000 bpd more than in its previous forecast.

And it found if a prolonged second wave of infections hits China, India, Europe and the United States in the second half of the year, demand could fall by 11.2 million bpd in 2020.

“My expectation would be demand continues to be quite a bumpy recovery,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

Analysts said they could see Brent holding near $45 a barrel but did not expect the market to push much higher in the near term.

“It’s difficult to see conviction either way. From a seasonal perspective, you’d probably anticipate things to weaken a bit,” Shaw said.