Oil prices topped $42 today after oil producer group Opec and its allies pledged better compliance with record production cuts in a meeting yesterday.
Worldwide standard Brent crude rose 2.3 per cent to hit $42.46 this morning, extending gains from its previous session.
Meanwhile, US benchmark West Texas Intermediate was headed back towards $40 where its previous rally ran out of steam, increasing 2.8 per cent this morning.
Both standards are now trading at their highest levels since early March.
During a meeting of the wider Opec+ alliance yesterday, Iraq and Kazakhstan said they would comply better with cuts, a source told Reuters.
Earlier this month, the cartel agreed to extend its record curbs of 9.7m barrels per day through July, further soothing an oil market which has been beset by volatility for much of the past three months.
Since April’s historic lows, which saw Brent plunge to pre-millenium levels and WTI fall into the negative for the first time in history, prices have steadily gained on a combination of market support and a slow return of demand.
A spike in cases in Beijing this week threatened to derail the rally, but the outcome of the Opec meeting appears to have calmed traders’ nerves.
Rystad Energy’s senior oil analyst Paola Rodriguez-Masiu said: “Complying with the full amount of 9.7m barrels per day, means shutting another million barrels of daily production. That’s not negligible and it is definitely a boost factor for prices”.
She added that although the meeting did not yield a recommendation to extend cuts through August, prices rose regardless, suggesting the $40 levels were here to stay.
“Prices from now on should grow naturally, without further artificial support from the supply side. Demand will be the force than will drive the market recovery from now on”, Rodriguez-Masiu added.