OPEC forecast on Wednesday a gradual recovery in global demand for oil, which has been hammered by the coronavirus crisis, and said record supply cuts by producers were already helping to rebalance the market.
In a monthly report, the Organization of the Petroleum Exporting Countries said demand would decline by 6.4 million barrels per day (bpd) in the second half of 2020, less than the drop of 11.9 million bpd in the first six months of the year.
Oil prices collapsed as government lockdowns to limit the spread of the virus curtailed travel and economic activity. While some places in Europe and Asia have eased restrictions, concern over new virus outbreaks has kept a lid on prices.
To tackle the drop in demand, OPEC and its allies agreed to a record supply cut that started on May 1, while the United States and other nations said they would pump less. OPEC said these curbs were already helping.
"The oil market was strongly supported by a reduction of the global crude oil surplus, thanks mainly to the historic voluntary production adjustment agreement," OPEC said, adding it saw a "gradual recovery" in demand until the end of the year.
A technical committee of OPEC and its allies, known as OPEC+, and an OPEC+ ministerial panel are meeting on Wednesday and Thursday to review the supply cut's impact on the market.
Brent crude was trading above $40 a barrel after the report's release and is up from a 21-year low below $16 reached in April.
In the report, OPEC did not further reduce its forecast for world oil demand in 2020, after steep cuts in earlier months. Still, downside risks remain for consumption in top consumer the United States, OPEC said.
The supply pact agreed in April involves OPEC+ cutting output by 9.7 million bpd in May and June. OPEC+ agreed on June 6 to extend the cut for another month, a decision OPEC said the market had taken well.
In its report, OPEC said it had cut supply in May by 6.3 million bpd to 24.2 million bpd. That amounts to 84percent compliance with the pledges, according to a Reuters calculation - higher than some estimates.