Oil prices fared well overnight, and while another fall in the US rig count may have helped, it was bulls on parade after the market got wind of reports that the OPEC+ meeting will be brought forward to this week, where the discussion will centre on extending 9.7Mbd 2Q cuts, which applied to April and May.

Now the waiting game sets in to see if the “sources said” media reports yields positive result for the markets.

Favourable news from OPEC+ is supporting oil prices: the group is considering a short extension of the initial phase of the production cut agreement, maintaining reductions at 9.7mb/d for an additional 1-3 months rather than beginning a phased easing of cuts from July 1 as originally planned.

The reports are putting to rest the split that seemed to have been emerging last week when Russia signalled it would begin to ease production cuts from July in line with the original OPEC+ agreement.

Still, a high-level phone call between the leaders of Russia and Saudi Arabia late in the week seems to have resulted in a deal from Russia to follow Saudi Arabia’s lead.

This is yet another indication of the sense of urgency within the OPEC+ group. And it provides OPEC + producers a platform to signal continued commitment to do whatever it takes to offset risks to demand with expedience and a highly coordinated supply management policy.

Falling global supply and nascent signs of improving demand as consumers emerge from their government-enforced lockdown have triggered Brent prices to nearly double since mid-April.

So long as the current OPEC+ compliance commitment argument for price recovery holds water, oil prices could stabilise at higher ranges.

Still, oil prices will remain sensitive to any symptoms that fundamentals are not improving as quickly as expected, and whether or not traders keep their trade war playbooks shelved.

The three requirements for oil market recovery to extend:

A recovery is underway with Chinese refinery demand now entirely up to year-ago levels, but only a third of the way up from the trough in US product demand with further to go. There is no reason with US mobility data rising by the day; the US refinery gap can not be filled.
Strengthening and continued OPEC+ commitment
CAPEX divestment in US oil production starting from early this year and a sharper downward adjustment in drilling activity than in 2015, which indicates greater discipline and may moderate future supply growth as prices rise in 2021-22. It is supportive of the current bullish oil narrative.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp