Brent, the global crude benchmark, rose above $40 for the first time in three months as markets factor in an extension of production cuts by members of the Opec+ alliance.
Brent was up 1.09 per cent trading at $40 per barrel, while West Texas Intermediate, the key US gauge, was also at a three-month high, trading 1.96 per cent higher at $37.53 per barrel at 8.35am UAE time.
Prices rose on reports that suggested Russia may agree to a one-month rollover of a historic pact to draw down more than 9.7 million barrels per day from the markets.
Oil producers have been cutting back at record levels in May and June, with the restrictions set to taper off at the end of the month. Saudi Arabia has been pushing for a one to three month extension at current levels, according to reports.
The producers, who were initially set for a meeting on June 9, may hold their virtual conference on June 4 and 5. However, no official announcement has been made yet.
Prices also gained as industry-funded American Petroleum Institute reported a decline in US crude stocks. Inventory levels at WTI physical delivery point in Cushing, Oklahoma, are estimated to have fallen by 2.2 million barrels last week, marking the fourth consecutive week of declines.
“Opec+ looks set on extending its deeper cuts by at least an additional month, helping to prop up the bottom of the market,” said Timothy Fox, research head and chief economist at Emirates NBD.
Oil’s gains come as markets begin a slow rebalance following the demand crunch caused by the coronavirus pandemic. Prices declined 60 per cent in April from their January peak, in the bleakest month for the markets, as countries remained under lockdown. WTI fell below zero to briefly trade at -$40 in April as storage capacity at Cushing dwindled.