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Crude Oil Higher; OPEC+ Meeting Eyed

By Peter Nurse - Oil markets traded higher Tuesday, with traders looking ahead to the next meeting of the major producers amid expectations they will agree to extend record production cuts.

At 8:45 AM ET (1245 GMT), U.S. crude futures traded 1.6% higher at $35.99 a barrel. The international benchmark Brent contract rose 2% to $39.10. 

Oil prices have soared over the past six weeks, thanks to record supply cuts by the Organization of the Petroleum Exporting Countries and allies, including Russia, a group dubbed OPEC+. However, prices are still down about 40% for the year so far.

These supply cuts are set to be scaled back at the end of June, according to the agreement hammered out in April, but these OPEC+ producers are now said to be considering extending their production cuts into July or August, at an online meeting likely on June 4.

“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” said analysts at ING, in a research note to clients.

Russia has not always been the most reliable partner in terms of adhering to agreed supply levels, but the country’s oil and gas condensate production fell to 39.7 million tonnes (9.39 million barrels per day) in May, near its target under the deal within the OPEC+ group, Interfax news agency reported on Tuesday, citing energy ministry data.

 The coalition -- which includes OPEC’s 13 members plus another 10 exporters -- has achieved 92% compliance, according to data analytics firm Kpler. Iraq and Nigeria have been laggards in meeting their pledged targets.

Meanwhile, onshore oil exploration in the U.S. shrank for the 11th consecutive week to a level not seen since before the shale revolution kicked off more than a decade ago.

That said, the market received a tentative sign that U.S. oil production is slowly re-starting as Parsley, the U.S. mid-sized shale producer, announced plans to "restore the vast majority of curtailments in early June". In May, it reduced output by around 26,000 barrels a day due to the low oil price.

Attention will now turn to the American Petroleum Institute’s weekly report on U.S. inventories of crude and refined products, at 4:30 PM ET.

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