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James Hyerczyk

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday on renewed optimism over the global demand recovery after Saudi Arabia’s governor of the kingdom’s central bank said on Tuesday that the country’s economic recovery is expected to be “positive” this year, partly thanks to rebounding oil prices.

At 12:36 GMT, May WTI crude oil futures are trading $59.85, up $1.20 or +2.05% and June Brent crude oil is at $63.30, up $1.15 or +1.85%.

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Fahad al-Mubarak, speaking at a virtual event organized by the International Monetary Fund, did not provide a forecast for economic growth but said initial economic indicators during the first quarter, as well as improved oil prices, were supportive.

“Even though we’re sacrificing a little bit in the production, however, achieving stable oil prices is good for Saudi Arabia, for producers, consumers and for the region,” he said.

OPEC+ Bets Crude Oil Demand Will Recover as Fast as Output Returns

On Tuesday, Clyde Russell from Reuters wrote that the move by the OPEC+ group of oil exporters to ease their output restrictions from May onwards is effectively a bet that the current soft demand for crude will improve at the same pace as production returns.

However, he did add that if history is a guide, it will be extremely difficult to get that balance correct, especially in the wake of such a large disruption to the global oil market as the coronavirus pandemic.

Last week, OPEC and its allies decided to add back an effective 2.1 million barrels per day (bpd) of output by July seems brave.

The group decided at a meeting on April 1 to ease their output cuts of about 7 million bpd by 350,000 bpd in May, another 350,000 bpd in June and by 400,000 bpd in July. In addition, OPEC’s top exporter, Saudi Arabia, said it was phasing out its extra voluntary cuts by July, a move that will add 1 million bpd.

The move was somewhat of a surprise as traders had been expecting OPEC+ to roll over their cuts for another month into May.

The question is whether OPEC+ will be proven correct that demand is recovering at a pace that will see the market being able to absorb that much additional crude.

For a look at all of today’s economic events, check out our economic calendar.
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