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James Hyerczyk

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher shortly after the opening on Tuesday as traders continue to assess the impact of the easing of coronavirus restrictions on demand. In the meantime, production continues to fall as both OPEC+ and U.S. producers make moves to lower supply.

At 12:13 GMT, July WTI crude oil is trading $26.35, down $1.27 or +5.06% and July Brent crude oil is at $30.52, up $0.99 or +3.34%.

The big story overnight is potentially bullish. Saudi Arabia made an unexpected commitment to deepen production cuts in June to help drain the glut in the global market that has grown as the coronavirus pandemic crushed fuel demand.

Saudi Arabia said it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

The news encouraged others to make similar cuts with the United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total.

On the demand side, bullish traders are hoping that the worst of the coronavirus is behind us, but the emergence of new outbreaks in China and South Korea have made them a little nervous and tentative about adding to long speculative positions.

A second wave of COVID-19 would devastate demand and pricing.

Daily Forecast

The sideways price action suggests investors are allowing the production cuts to work their way through the global economy. Meanwhile, the easing of restrictions across the globe are also being monitored. Both moves are helping to underpin the market.

Later today at 20:30 GMT, investors will get the opportunity to react to the latest data on weekly supply from the American Petroleum (API). This report is expected to show a build of about 4.3 million barrels.

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