Oil futures gained more than two percent on Thursday after major producers at a meeting of the Joint Ministerial Monitoring Committee (JMMC) of the Organisation of the Petroleum Exporting Countries (OPEC) said it was making moves to ensure that certain countries make up for failing to fully meet their reduction targets last month.
The Brent crude, which down earlier in the session, rose by 2.01 percent or 82 cents to sell at $41.53 per barrel, while the US West Texas Intermediate (WTI) crude futures inched near $40, rising by 2.53 percent or 96 cents to trade at $37.06 per barrel.
The JMMC, which monitors compliance with OPEC output quotas, held its gathering via video-conference on Thursday and stressed the importance of full compliance with pledged production cuts.
Earlier this month, the producer group OPEC+ agreed to extend cuts of 9.7 million barrels per day to July and monitor compliance to those reduction efforts monthly.
After July, the cuts will be reduced to 7.7 million barrels per day until December as the JMMC didn’t discuss extending record cuts beyond July.
The committee, however, noted laggards in May, with Iraq and Kazakhstan presenting a plan for how to compensate for May overproduction from July to September, while Nigeria, Angola and Gabon have been given until Monday to submit their plans.
Compensations by laggards in coming months mean that even if OPEC+ decides to ease cuts, they will be deeper and will help solve the supply side of the market and improve prices.
The JMMC will meet again on July 15, when it would recommend the next level of cuts to the alliance.
On the demand side of things, there are renewed worries as a surge in coronavirus cases led China to cancel flights and shut schools in capital, Beijing, while several states in the US reported sharp increases in new cases.
Also, a second straight weekly rise in US crude stockpiles to a record high also weighed on sentiment.
