Energy Minister Suhail Al Mazroui of the United Arab Emirates said that the production cuts administered by OPEC members will soon bring oil prices back to normal.
When the markets collapsed, Mazrui initially claimed during a conference call that $ 40 a barrel of crude was a dream. However, this was before OPEC agreed to an unprecedented reduction in production.
Now, prices may recover due to the production cut of about 10 million barrels per day.
"We saw very good signs of rising demand," Mazrui said. "We saw that the number of cars is growing," he added, referring to increased demand in China, India and Europe.
Mazroui did not specify what he meant by "normal" prices but last year, Brent oil averaged around $ 64 per barrel.
"In the previous agreements, we were able to trick countries because there were no obligations. Now, there is a rule, so countries will have to come and declare their obligations,"
Mazrui also said that the OPEC + agreement has created a "permanent" group of nations that will coordinate its activities to manage oil markets.
Meanwhile, the Energy Minister of India said that consumption recovered in the first half of June, but is 15-20% lower than a year ago. This became clear when the International Energy Agency announced in its monthly report that fuel consumption next year will be 2.5% lower than last year, mainly due to the slow growth in jet engine fuel consumption.
These concerns are partially mitigated though as the US Federal Reserve said that it would start buying a wide portfolio of corporate bonds, fostering sentiment in the financial markets. At the same time, OPEC members are complying with expanded production restrictions, and Saudi Arabia reduced delivery to some Asian refineries by about 40%. Iraq also promised a significant reduction in its oil production.
Thus, Brent oil recovered quickly, as soon as OPEC and the US began its production cuts.
The White House's plan to spend about $ 1 trillion on infrastructure can also be price-positive if it materializes.
"Massive incentives around the world will drive recovery," said Bjarne Schieldrop of SEB. "The higher the stock, the higher is the price of oil," he added.
Demand for fuel also improved when large refineries began to close. Houston gasoline rose to a three-month high after Motiva Enterprises closed its key block at the largest US refinery in Port Arthur, Texas.
Shale production is also still declining, and, according to the forecasts of the Energy Information Administration, it will continue its decline until next month.
OPEC and its allies agreed to maintain production cuts of around 10% of global supply next month, and will hold committee meetings on Wednesday and Thursday to assess their impact. So far this month, supplies from Saudi Arabia have remained muffled, and flows to the US have plummeted.
