Crude prices supported by OPEC+ optimism on supply cuts

Singapore — 0155 GMT: Crude oil futures were trading higher in mid-morning trade in Asia June 19 after OPEC+ stepped up compliance efforts on production quotas during a June 18 meeting.

At 09:55 am Singapore time (0155 GMT), ICE Brent August crude futures were up 27 cents/b (0.65%) from the June 18 settle at $41.78/b, while the NYMEX July light sweet crude contract was 29 cents/b (0.75%) higher at $39.13/b.

Saudi Arabia stepped up its campaign against OPEC+ quota busters on June 18. Over-producing countries will have until June 22 to submit their supply cut schedules for compensation, according to the Joint Ministerial Monitoring Committee, or JMMC tasked with monitoring the OPEC+ production cut accord.

Meanwhile, news that Iraq and Kazakhstan detailed to the alliance how they will implement deeper output curbs in the coming months to make good on their quota violations in May, also supported the market.

Overall OPEC+ compliance with the cuts was 87% for May, the committee said June 18. Delegates had previously identified Iraq, Kazakhstan, Nigeria and Angola as the biggest offenders.

"This week has presented a panacea of opportunity for long-term strategic oil buyers," Axicorp chief global markets strategist Stephen Innes said in a June 19 note.

"They have steadily remained dip buyers believing wholeheartedly in OPEC delivering a healthy dose of medicine to the ailing oil markets, namely that the novel principle of compensation would be for the first time introduced in OPEC's history," Innes added.

OPEC+ is in the midst of a 9.7 million b/d production cut agreement set to run through July, before scaling back to 7.7 million b/d through the rest of the year, with the JMMC meeting monthly to adjust the quotas as needed.

Despite this, uncertainty continues to cloud the outlook for market recovery, especially after recent signs of resurgence in COVID-19 cases in key economies including the US and China.

"Sentiment can be seen still in this flux going into the end of the week with the slews of concerns ranging post reopening COVID-19 spread to weak economic conditions capping gains," IG's market strategist Pan Jingyi said in a June 19 note, with regards to broader Asian markets.