Oil rose towards the level of $27 a barrel on Friday as the Organization of Petroleum Exporting Countries (OPEC) and its allies began a record production cut to address an oversupply affecting the market, a consequence of the coronavirus crisis.
Brent crude, the world benchmark for oil, fell about 60% in 2020 and reached its lowest level in 21 years last month as the COVID-19 pandemic suppressed demand while OPEC and other producers continued to pump, before the new supply-cutting deal began on Friday.
Brent crude for July rose 37 cents, or 1.4%, to $26.85 by 1205 GMT. US crude for June rose 83 cents, or 4.4%, to $19.67. Both benchmarks rose sharply on Thursday - Brent crude rose 12% and American crude rose 25%.
Production cuts began at around 9.7 million barrels per day by OPEC, Russia and other producers, known as OPEC+, on Friday. However, there are doubts that the cut, which is the largest agreed upon to date, will be sufficient.
A Reuters survey showed on Thursday that before the new production cut, OPEC sharply raised output to the highest level since March 2019, adding to the excess supply in the market.
Industry sources say that Iraq emphasises the difficulties that some producers will face in fulfilling their obligations and will strive to meet its share of production cuts by about a quarter. Iraq is the second largest producer in OPEC.
US crude inventories rose by 9 million barrels last week, which is less than analysts' expectations of a rise of 10.6 million barrels, which has positively affected the price.