Oil prices continued to climb on Tuesday, on the hope that the Organization of the Petroleum Exporting Countries, or OPEC, will continue to curb production through the summer. United States crude futures for July gained 1.1%, reaching $35.82 per barrel. The price of West Texas Intermediate rose by 2.3%, to $36.21 per barrel, and Brent crude gained 2.4%, to $39.20.
We all remember when, in April, the price of West Texas Intermediate futures crashed below zero dollars per barrel. Storage space maxed out, and the market was literally flooded with crude. Conditions were such that suppliers were ready to pay distributors to take oil off their hands.
Since then, oil prices have climbed. Driving is picking up in the United States, as states begin easing restrictions. Demand in China and Europe is coming back as well.
One interesting conundrum is the decline in oil production in the United States. As prices fall below a point of profitable extraction, numerous companies have had to slow or stop production. This means that hundreds of companies could fold, but it also has the effect of pushing prices up.
Tuesday’s ascent followed news that OPEC and allied countries (mainly Russia) may extend supply cuts. The countries originally agreed in April to cut 9.7 million barrels per day in supply through June, eventually decreasing cuts to 7.7 million barrels, and then 5.8 million barrels per day. Now, OPEC and allies may extend the 9.7 million barrel cuts through July or August. Such a move could help to further support prices. The countries are moving a conference call up by nearly a week to discuss the matter. Analysts are confident that this move could mean all countries are on board with extending cuts.