Brent Oil Exceeds $40 per Barrel for the First Time Since the COVID-19 Pandemic

Brent Oil Rises 2.02% to $40.37
Expectations Grow for OPEC+ Production Cut Extension

[Asia Economy Reporter Naju-seok] The international benchmark Brent crude oil price has surpassed $40 per barrel for the first time since the COVID-19 pandemic. This is the result of expectations for economic reopening combined with hopes for an extension of production cuts by OPEC+ (the Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC allies).

[Image source=Yonhap News]

On the 3rd, Brent crude oil for August delivery on the London ICE Futures Exchange was trading at $40.37 per barrel as of 10:30 a.m. Korean time, up 2.02% ($0.8) from the previous trading day. This marks the first time Brent crude has recovered above the $40 level since the failure to reach an OPEC+ production cut agreement on March 6 of this year.

According to Bloomberg News, Russia and OPEC oil-producing countries held a virtual meeting this week and reportedly agreed to reduce oil production by 9.7 million barrels per day next month as well.

At the previous OPEC+ meeting, the oil-producing countries reached the largest production cut agreement in history. However, the agreement stipulated that the 9.7 million barrels per day cut would only last through May and June, after which the cut would be reduced to 7.7 million barrels per day starting in July. Initially, Russia was expected to reduce the cut size according to the existing agreement, but it appears to have accepted Saudi Arabia's proposal. Saudi Arabia advocated for maintaining the 9.7 million barrels per day cut for an additional one to three months.

International oil prices have been on an upward trend since hitting bottom in April this year. This reflects expectations that oil demand will gradually increase as countries lift economic lockdown measures implemented to curb the spread of COVID-19.

However, risks remain. It is uncertain how the unrest in the United States following the death of George Floyd and the changes in daily life caused by COVID-19 will impact the market. Moreover, if oil prices rise, there is concern that shale production in the U.S. will increase, potentially leading to a recurrence of oversupply.

This content was produced with the assistance of AI translation services.