By Yasin Ebrahim
Investing.com – Crude oil prices wrapped up a weekly win after settling higher on Friday, as a wave optimism over OPEC and its allies stepping up compliance efforts on production cuts bolstered investor sentiment. But some experts have warned the rally could soon run out of steam.
With OPEC+ compliance standing at 87% for May, oil members that signed up to the production-cut agreement are taking measures to cut production and boost compliance.
Iraq and Kazakhstan, both of which overstepped their production quotas in May, have submitted to the OPEC+ alliance their detailed plans to cut oil production in the coming months.
But other offenders guilty of overproducing, including Nigeria and Angola, will need to submit plans to rein in production by June 22, according to the Joint (NASDAQ:JYNT) Ministerial Monitoring Committee tasked with overseeing the OPEC+ production cut accord.
The latest weekly win – the eighth in the past nine weeks – has triggered some worries that prices are running out of road as countries worldwide are unlikely to lift all restrictions anytime soon.
A prolonged rally above the $40 level “will be difficult for WTI crude as restrictions are not going away anytime soon… “so oil prices at best might have another dollar or two to climb higher, said Edward Moya at Oanda
Others, meanwhile, have flagged the start of hurricane season as a potential headwind for oil prices.
“Hurricane season is yet another variable that could tip the tenuous recovery of the oil market back into more bearish pricing territory,” Erika Coombs at BTU Analytics said.
The latest rig count data, which serves as a proxy for oil production and oil services demand, fell to record lows for the seventh week in row.
Data last week showed the number of oil rigs operating in the U.S. fell by 13, to 266.